We Should Fear Slow Growth, Not Inequality

Posted April 29, 2014 15:27:20

City and South London railway>> Photo: The living standards of the 19th century workers and those of today are virtually incomparable. (Supplied: TfL from the London Transport Museum collection)

So much of the inequality debate focuses on the rich instead of the poor, and fails to address slow economic growth, the true danger of the 21st century, writes Chris Berg.

Is inequality the defining issue of our generation? According to the French economist Thomas Piketty's incredibly popular new book Capital in the Twenty-First Century it is.

But Piketty's book actually demonstrates something else. Inequality isn't the essential economic danger of the 21st century. The danger is slow economic growth.

It's remarkable how many hidden assumptions and unexamined ideological preferences surround the entire inequality debate.

Piketty's argument has been widely recounted. He has carefully investigated high-wealth tax returns in Europe and the United States and, deploying some intuitive reasoning, claims to have detected a central contradiction in capitalism.

Income inequality, rather than converging over time to make us more equal, actually diverges to make us less equal, and society therefore less meritocratic.

More formally, Piketty argues that the rate of return on capital (r) exceeds the rate of economic growth (g). That is, r > g.

As a consequence, rich investors accumulate wealth at a faster rate than ordinary income earners. That wealth is then passed on to their children. Over the long term, this creates an established permanent class of the super-rich, whose privilege cannot be justified by any meritocratic or utilitarian considerations.

It's a powerful story. The specifics of his model are debatable - see Paul Krugman's supportive review and Tyler Cowen's critical one - what's more interesting is what the book suggests is why we should worry about inequality.

The last line of Piketty's Capital is "Refusing to deal with numbers rarely serves the interests of the least well-off." This widely quoted aphorism is supposed to reflect his interest in empiricism. Yet it's quite misleading. The least well-off don't make much of an appearance in the book at all.

Capital offers a theory of the rich, not the poor. Specifically the very rich - the top 1 per cent of the population. They're the ones in his model about inherited wealth. However, the 9 per cent of people below that 1 per cent (that is, the rest of the richest 10 per cent) earned their wealth from income like the rest of us, not from capital investments and inheritance.

There are lots of potential reasons to care about inequality. The most obvious one is if high incomes lowered the incomes of those at the bottom of the scale. But outside some Marxist intellectual holdouts, there is no suggestion that the mere existence of the super-rich creates poverty.

No doubt some extreme incomes have come at the expense of the rest of society. In Russia the oligarchs have expropriated public wealth to become private wealth. In our liberal society, rent seeking or legal constructs like intellectual property can generate wealth at the expense of the rest of us.

But the issue in these cases is not the existence of the wealth but how it was taken. And the solution would be to close down the illegitimate means of acquiring that wealth.

So what of the poor? Piketty compares 19th century capitalism to 21st century capitalism and finds that they share roughly the same pattern of capital accumulation and inherited wealth. But even a casual observer of the historical record would understand that the big shifts in the interim century haven't been focused on the rich but on the poor.

Piketty is viscerally opposed to inequality. He says his story is "potentially terrifying". OK. But he doesn't get much more specific than that.

There are lots ways to measure inequality. If we look at inequality of consumption we see convergence rather than divergence. Where, in the past, only the rich could afford home heating, food refrigeration, personal transport, and to outsource chores like clothes washing, now those luxuries are shared by rich and poor alike. The living standards of the 19th century and those of today are virtually incomparable. (I made this argument on The Drum last Christmas.)

Good news for the poor, and all thanks to economic growth. Let's return to Piketty's formula: r > g. As he says this is not true at all times, but it is now, just as it was in the 19th century. Sometimes growth catches up to the rate of return on capital. Piketty believes we're in for a prolonged period of low growth. So does the Commonwealth Treasury. But doesn't that define the challenge?

The logic of his book suggests we ought to be single-mindedly trying to increase economic growth. Piketty dismisses a growth focus with a simple hand-wave. Yet it is surely no more an unrealistic goal than his alternative: a globally-imposed tax on capital to suppress extreme wealth.

And (here's a bonus!) a focus on growth above all else would directly help the poor.

Piketty is viscerally opposed to inequality. He says his story is "potentially terrifying". OK. But he doesn't get much more specific than that. A number of times in his book he fears wealth inequality will lead to political turmoil, even revolution. This dynamic isn't elaborated.

(A subsidiary concern he has is that high net wealth individuals dominate western culture. Maybe. But surely this applies better to the top 10 per cent rather than the inherited 1 per cent he focuses on.)

Arnold Kling makes a really important economic point - Piketty's nightmare of mass capital accumulation would actually boost the wages of the rest of us. That doesn't sound terrifying, unless you are less able to enjoy your own earnings if others earn more.

The philosopher John Rawls more concretely outlined what he saw was the ability of financial power to become social and political power. Yet if it is political power we are concerned with, then why not tackle political power directly? In New South Wales the ICAC has shown that wealth is neither a necessary nor sufficient condition to wield corrupt influence. It wasn't inherited riches that gave us Eddie Obeid.

The purpose of Piketty's proposed global capital tax isn't really to collect money for spending elsewhere. As he says there are so few high income individuals that even a very large tax would collect a small amount of money. Instead, its goal is simply to reduce the size of those honey pots.

There are lots of progressive reasons one might want to tax a population - for instance, social services or transfer payments. But simply because the government doesn't like people having lots of money seems like a very bad one.

Yet in context it makes sense. Piketty's book - and so much of the inequality debate more generally - seems to suggest that the core problem with inequality isn't that lots of people are poor, but that a few people are rich.

Chris Berg is a research fellow with the Institute of Public Affairs. Follow him at twitter.com/chrisberg. View his full profile here.

Topics: business-economics-and-finance, economic-trends

Comments (288)

Comments for this story are closed.

  • MJLC:

    29 Apr 2014 3:45:22pm

    "We should fear slow growth, not inequality"

    I suppose the idea of fearing slow growth AND inequality would have stretched Mr Berg's resources beyond their somewhat prosaic limits.

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    • Mitor the Bold:

      29 Apr 2014 6:15:47pm

      "It's remarkable how many hidden assumptions and unexamined ideological preferences surround the entire inequality debate."

      Berg rarely hides his own ideological preferences - this entire essay is a rebuttal of the book he reviews, predicated on nothing more than the fact that it contradicts his ideological world view. You know the particular one: concentrations of wealth and power in governments for the benefit of citizens are evil and unnatural; concentrations of wealth and power in corporations for the benefit of shareholders are benign and natural.

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      • Andrew:

        30 Apr 2014 8:21:18am

        Mitor, you seem content to argue that because Chris Berg has an ideology that differs from yours, everything he says must be wrong.

        Nowhere in your post is there a response to his main point, that inequality is not of itself a problem, but poverty is. I find that difficult to refute - how about you?

        If we agree that living standards have grown enormously at all levels of society in the last century, does that not suggest that capitalism has been successful?

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        • Applaudanum:

          30 Apr 2014 8:43:58am

          No, Andrew, it suggests that Capitalism has been successful when tempered by government oversight. If we compare the plight if the poor in the U.S with the poor in Scandinavia, which blend of Capitalism and government oversight has worked better?

          I've read a few people on these pages recently suggest that the contemporary poor in the first world have a vastly better life than the poor of earlier times. If we go right back, the contemporary poor in the first world even outstrip the royalty of earlier times, or so it is argued. I have to agree, technological advancements have been the driving force, yet I can't think that if Egyptian Pharaohs and Dark Age Royalty are the standard, perhaps the first world rich should be brought back to the standards of the first world poor.

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        • Andrew:

          30 Apr 2014 9:06:27am

          Applaudanum - thanks for your response.

          I agree that technology has been the driver of higher living standards. But the same technology has been available (not necessarily affordable) to all regimes, and the capitalist ones have raised the bottom living standards by the greatest amount.

          Capitalism is far from perfect, as typified by the kind of inequality and money influence people on this forum have brought up, but it's still the best system so far.

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        • Applaudanum:

          30 Apr 2014 11:33:27am

          Thanks, Andrew. My main point, however, was that capitalism does not operate in isolation and rarely is capitalism unfettered. The 'best system so far' is held in check to varying degrees in different countries. In the first world, those countries that put a tighter reign on capitalism's negative consequences are those that have raised the living standard of poor people by a greater amount. Do you think that the higher taxes in Scandinavian countries and the comparatively easier plight of their poor is a coincidence?

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        • Noah's Ark:

          30 Apr 2014 11:45:29am

          Capitalism is not the best system it is however the "Dominant System". we have little choice and being Plebs we don't really have any say. The Extreme Corporate Capitalist model we have at present is destroying both the planet and lives. Both of which could be lived more harmoniously if we chose a more sustainable renewable system of advancing technology and if we done away with extreme wealthy elites.

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        • a:

          30 Apr 2014 3:06:50pm

          Capitalism is all about creating inequality, how else are the capitalist going to get rich? The system works great for the 1%, who designed the system in the first place.

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        • David H:

          30 Apr 2014 8:49:08am

          It's technology, not capitalism, that has improved peoples living standards. Thanks to productivity and efficiency improvements you can buy more for less. Capitalism does drive technology, but it's not a variable exclusive to capitalism. Living standards have the potential to improve even faster, particularly for those at the bottom end.

          Relative wealth of the poor now is the lowest it's ever been. Berg's argument is equivalent to the Slave Trader's "The slaves are better are off now that I give them food and board."

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        • Andrew:

          30 Apr 2014 9:07:57am

          David, thanks.

          >Capitalism does drive technology, but it's not a variable exclusive to capitalism.

          True, but capitalism has used it more than the other types of regime to raise the lowest living standards.

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        • Mitor the Bold:

          30 Apr 2014 8:57:13am

          "Nowhere in your post is there a response to his main point, that inequality is not of itself a problem, but poverty is. I find that difficult to refute - how about you?"

          Poverty is relative, not absolute. None of us starve to death. Barely existing compared to living easy by dint of fortunate birth is not a state of being that is equitable or fair. Inequality is not a problem in so far as the gap is motivational rather than oppressive, but when the inequality is itself a barrier to aspiration then it is a problem.

          Poverty is a red herring- inequality is the catalyst for societal unease. If we're all poor or all rich we're all happy. If some of us are doing ok while some of us could be doing better we're all fairly ok. If a small few of us are very wealthy while most of us are trapped in struggle then we're not ok. Inequality in wealth makes us as indignant as inequality in any other area of our lives - it doesn't feel fair, especially when that inequality is inherited.

          Berg says it shouldn't matter - but I think he is wrong for the reasons I've stated.

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        • Oaktree:

          30 Apr 2014 10:59:10am

          Mitor, I believe you are right in making a distinction between poverty and inequality. I think this goes further and that we are heading for a clear and combative divide. Changes to the welfare system are inadvisable for this reason, and Abbott would do well to concentrate on finding ways to raise funds elsewhere and continue with the educational opportunities Ms Gillard introduced. Unfortunately the "more equal" will prevent him from doing that.

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        • Peter the Lawyer:

          30 Apr 2014 1:13:37pm

          Povert is absolute not relative.

          You ideas are basically the politics of envy and greed, Mitor. You are basically saying that it's acceptable for people to be upset merely because others have it better than themselves. If the rich, merely by being rich, caused the less well off to suffer, then there may be some justication for the latter to want the rich to be made poorer in the manner that Picketty proposes. But it western democracies this is not the case. Berg quite rightly points out that that in those countries absolute poverty has been reduced to an extrelmely low level. He also points out that Picketty provides no proof that inequlaity means that the rich are getting rich at the expense of the rest of us.

          In fact Picketty is trying to get rich by stirring up resentment of the rich, surely a variation of the old adage about all power and no responsibility- the preogative of the harlot throughout the ages.

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        • AT:

          30 Apr 2014 9:08:12am

          "Mitor, you seem content to argue that because Chris Berg has an ideology that differs from yours, everything he says must be wrong."

          Exactly the same could be said of Berg's article, Andrew.

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        • Andrew:

          30 Apr 2014 9:48:38am

          AT, I'm surprised to hear you say that.

          Berg's article is a critique of the arguments in Piketty's book. It discusses issues and points of view.

          Parts of it allude to an "old fashioned economist" point of view, but that is not in itself the criticism - it's more of an explanation of the origins of Piketty's viewpoint, which is itself criticised substantively.

          Thus: "Piketty is viscerally opposed to inequality. He says his story is "potentially terrifying". OK. But he doesn't get much more specific than that. A number of times in his book he fears wealth inequality will lead to political turmoil, even revolution. This dynamic isn't elaborated."

          I haven't read Piketty's book, so I can't confirm whether the dynamic is elaborated - but if not, this paragraph is a valid, substantive criticism, not a disagreement along ideological lines.

          My point here is not to agree with Berg (which I don't particularly) but to point out that we should be dissecting his content, not his origins.

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        • AT:

          30 Apr 2014 10:55:06am


          Surprised? Sorry, I didn't mean to startle you.

          Elsewhere on this page I've described Berg as attempting to refute Picketty's book with nothing more than anecdotes. I stand by that. At the very least it's appalling writing, but it's also very predictable from this bloke. This article is not a mature critique of a scholarly work, it's just another excuse for Berg to push his agenda.

          For somebody with Berg's form to get away with his escapades, he really needs to present a more palpable argument.

          Meantime, Picketty has become a star on back of an economics theory book (of all things!) while Berg continues to churn out these petulant little tantrums.

          Popularity does not always equate to credibility, of course, but in this instance the gulf between Picketty and Berg is also a pretty good indicator of their relative virtues.

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        • Peter the Lawyer:

          30 Apr 2014 1:06:04pm

          Actually, Berg's review was very cognet given the small space he has to write it.

          He has hit the nail on the head: Picketty wrote to confirm his bias. In equality in itself is not important, poverty is. We should concentrate on making the poor bettr off, by encouraging growth, not just taxing the rich merely in order to reduce inequality.

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        • will_r:

          30 Apr 2014 9:45:56am

          No, the problem is that poor people are being indentured to capital owners as serfs, working at ever higher levels just to stave off 'poverty'. And we'd like to avoid that, yes?

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        • the working man:

          30 Apr 2014 3:02:45pm

          No sir, it's what Chris says when is in power as to when

          the born to rules are in power. Just remember it was

          Labor who fought for the forty hour week and other

          benefits. Many great Labor PM 's gave us Medicare,

          compulsory super, uni scholarships, native title, paid

          parental leave, NDIS etc. All of these opposed by the

          coalition and their mates at the big end of town.

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    • Mark:

      29 Apr 2014 6:16:50pm

      Especially given that high income inequality is a drag on economic growth.

      Economic growth is driven by a consumer demand for goods and services. The lower and middle class drive this consumption because they spend a great proportion of their incomes on these very goods and services. The members of the upper class will buy more expensive goods and services, but they aren?t spending nearly the same proportion of the income, and rather invest large portions of it. Essentially the upper class is inefficient at returning money into the economy, and instead locks more and more of it up in investment commodities.

      By shifting the tax burden onto the rich and super rich, you free up the purchasing power of the lower and middle classes, as well as gaining more money to invest in education and infrastructure, which in turn is better for businesses.

      I agree that taxing wealth for the sake of taxing wealth is a pointless exercise. But taxing wealth is a progressive tax, and given that taxation is undertaken by the government, revenue received by a wealth tax would go towards things like social services and transfer payments. I doubt anyone thinks the government plans to throw it all on a fire [insert snide comment based on blind political allegiance here].

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      • RayS:

        29 Apr 2014 8:05:31pm

        Obviously, Abbott isn't about to introduce a wealth tax and Labor would face immense resolute opposition from the oligarchs, miners, the banks and global capital, not to mention the US and its CIA.

        However, wealth is steadily accumulating into the hands of the relatively few while the tax burden falls upon salary earners of all levels.

        That is what is unsustainable, not Sloppy Joe's undeserving poor hypothesis. We live in a capitalist society and we give the wealthy the right to own unlimited wealth, but they must pay tax and they don't. Those who hold wealth do not declare income so they don't pay tax.

        They boast only the poor pay tax - how appalling and disgusting.

        Yet in a democracy we all call the shots, if there are politicians who will take up the issue.

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        • Oaktree:

          30 Apr 2014 1:56:21pm

          Actually, the way ICAC is building, this may become an irrelevance. I am beginning to doubt the Abbot Government will last its first term. I have read there are question marks over the Thomson trial with the magistrate making his judgement on last minute charges Thomson did not have a chance to defend, and now I see one of the prosecution witnesses in that affair is being accused of handling a slush fund built from hapless HSA union members' funds. No one is saying where that slush money was going, but I await developments with interest, and disgust.

          If the party survives there is a chance for some moderates to emerge and they will have to do some listening to the electorate.

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    • Monty B:

      29 Apr 2014 7:44:54pm

      I am reminded of Sir Humphrey Appleby lamenting that by enacting large pay increases for senior public servants he was inadvertently enriching himself.

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    • Blzbob:

      29 Apr 2014 11:53:45pm

      Slow growth is the result of inequality.

      no one would produce anything if no one could afford what they are producing.

      Inequality wipes out a large proportion of demand, so the response is to wind back on supply to keep profits at a maximum.

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      • burke:

        30 Apr 2014 11:09:36am

        Henry Ford arranged his business so that his employees could afford to buy his cars. So he got supply and demand. There seem to be precious few examples of his thinking lately. Obviously we need more Henry Fords.

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    • RealReformForAustralia:

      30 Apr 2014 7:04:06am

      Inequality, in and of itself is the norm. It is not to be feared. Poor food, housing, clothing, medical support, educational opportunities and high crime are all associated with failing economies.

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      • Blzbob:

        30 Apr 2014 8:53:09am

        Economies fail because all the wealth ends up in too fewer hands.

        Even third world countries with the poorest people still have their billionaires.

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        • RealReformForAustralia:

          30 Apr 2014 9:48:59am

          Thats true, but that situation is not relevant here in Oz.

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        • Peter the Lawyer:

          30 Apr 2014 1:15:03pm

          But they have fewer billionaires than successful countries.

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        • Digz:

          30 Apr 2014 2:04:26pm

          That's not a mechanism for success; it is merely a fact that could be more evidentially a demonstration of the very issue that Piketty was writing about

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      • bleter:

        30 Apr 2014 10:52:09am

        There is a lot of evidence (as good as you can get in economics) that shows for a given level of total wealth, you get more crime, poorer overall health etc in unequal societies.

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        • Peter the Lawyer:

          30 Apr 2014 1:16:53pm

          So you need to stop the lefties stirring up the crime by appealing to the sin of envy that lies in the breast of us all.

          In fact I would suggest that we need to have a public campaign against envy which is a far more dangerous thing than racism, homophobia and sexism combined.

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    • Noah's Ark:

      30 Apr 2014 11:32:26am

      The points that Berg is deliberately leaving out of his critique is that the poor are now in the 21st Century heading back rather quickly to their status in the 19th Century when it comes to misery and wealth inequality. He misses out completely the point Piketty makes that it was only during the 20th Century that the poor increased their overall living standards. That it was due to the long Post War Boom that lifted all boats (in the Western world) after the Second World War. Piketty also points out that it took two world conflicts to arrive at that situation by smashing the wealth of the 1% ers elite of the Gilded age.

      In current situation/times however Berg has rather conveniently forgotten this scenario and implies that the poor are still living in the Post War years of the 20th Century. It is disingenuous of Berg or perhaps rather cunning to omit such real details then place his own brand of interpretation which is completely skewed and come out with some nonsense about "Growth" . Mr Berg how much "Growth" can you actually achieve on a finite planet. The limits are fast approaching and we won't have much of a planet left if we don't use the technology available to develop renewable industries.

      The other detail Berg refuses to discuss is that the current 1%ers provide the space for the next 10% of individuals in wealth to climb the wealth ladder. The 1%ers dictate how they get there and at present they get their by enforcing the dictates of the 1% ers which in the majority of cases then dictates that the bottom 40% become increasingly worse off whilst the middle class struggles to tread water with the very real fear of disappearing into the lower classes as has/is happening in the United States.

      Therefore the 1% ers who actually have the means of production at their behest should in the very least be restrained, taxed accordingly (no more offshore tax havens - these need to be outlawed internationally), no more tax minimisation schemes and made to be accountable for the ills of the planet. Or we can simply overthrow them. It is obscene that such a small number of persons have accumulated such wealth and command such power and influence over the rest of the population and the state of the planet.

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      • Peter the Lawyer:

        30 Apr 2014 1:19:26pm

        No, Berg is saying that we should encourage economic growth to return to the good days of the 20th century (or in Oz up to 2007) because that will make things better for the poor. Picketty's solution on the other hand is to somehow makes those days return by taking money away from the rich. merely reducing inequlaity wil do nothing. It just means that we will be more eual but all be poorer.

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  • South of Saturn:

    29 Apr 2014 3:47:59pm

    I think what Picketty is getting at is looking at the Global economy as a whole, rather than specific rich western countries...economic growth is not necessarily a bad thing as long as it is sustainable and shared...technical economic growth where overall numbers go up but a vast underclass (think third world citizens with very little say in things) keep getting further and further behind is where he argues potential Revolutions could occur...indeed this is very basic revolutionary theory...

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    • Ann:

      30 Apr 2014 1:36:45pm

      Indeed, and his "not elaborating" on discussions of revolution are probably due to not wanting to be seen as invoking revolutionary feeling. Which is entirely sensible and responsible. Revolutions tend to be bloody, bloody things. If the rich could make the poor happy without the need for pitchforks to be involved, all the better.

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  • Joe Blow:

    29 Apr 2014 3:49:00pm

    Chris, what you are saying is: Economic growth produced in the course of the rich getting richer, benefits us all. So who cares if a few people get super rich, as long as the growth that goes along with it makes us all better off? I don't agree. First, the problem with the super rich is not that they are rich (as if riches are a bad thing in themselves). The problem is that first, those riches give unequal power to run the world the way they want (one reason why r > g) so its ultimately about inequality of power, and second, the assumption that the super rich are only taking a tiny fraction of the overall wealth (because there are so few of them) so we shouldn't bother about them. In reality, the super rich take a large slab of the world's wealth. So the problem is that r > g is bad because it reduces g, not because r is bad in itself.

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    • Lad:

      29 Apr 2014 6:45:31pm

      Well said on your first point Joe

      Very few people stop to consider the real root of the problem - that money can, and most often does, equal power.

      These are two concepts, that although frought with difficulties, need to become separated for any serious discussion regarding equality.

      There will always be people with more money than others. For some, money is their sole motivation in life; others use it as a path to power; the majority, I would argue, seek it simply to keep up with the Jones'; whilst some aren't motivated by it all.

      However, vested interests have always contorted political processes.

      The key challenge in my mind is the need to ensure a system that equates to one person one vote, not one dollar one vote.

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      • anon:

        30 Apr 2014 12:17:03pm

        very well said. The only thing I would add is that there will always be "something" that equals power. As much as money is not perfect I prefer it over brawn.

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    • Cyn:

      30 Apr 2014 12:56:46am

      With what you said about rich taking a giant slab of the world wealth, I think I heard somewhere that something like 1000 people have as much wealth as the bottom 50% in the world so that capital tax could go a long way to helping those 50%.

      I can't remember where I heard it, or how many people it was exactly, but it was ridiculously low defiantly less than 2000

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      • Pete:

        30 Apr 2014 10:41:37am

        It's actually 85 people. Yes, you read that right. 85. (source: Forbes)

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        • burke:

          30 Apr 2014 11:10:50am

          I agree - tax could help those people - less tax on the wealthy!

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        • Applaudanum:

          30 Apr 2014 1:43:33pm

          Too right, Burke. Significant tax cuts for those 85 people will generate more wealth for those 85 than tax cuts for any other group of 85 people. Stands to reason that such a strategy is then the most 'productive'. Why is it that all those 'envious lefties' wish to harm productivity?

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    • Noah's Ark:

      30 Apr 2014 12:30:23pm

      Below is a much better analysis of what Piketty has to say (although only a part of that analysis) rather than Bergs excuses for a critique.

      "Put crudely, if growth is high and the returns on capital can be suppressed, you can have a more equal capitalism. But, says Piketty, a repeat of the Keynesian era is unlikely: labour is too weak, technological innovation too slow, the global power of capital too great. In addition, the legitimacy of this unequal system is high: because it has found ways to spread the wealth down to the managerial class in a way the early 19th century did not.

      If he is right, the implications for capitalism are utterly negative: we face a low-growth capitalism, combined with high levels of inequality and low levels of social mobility. If you are not born into wealth to start with, life, for even for the best educated, will be like Jane Eyre without Mr Rochester."

      The managerial class would account for Berg's 10%ers of wealth income distribution below that of the 1%ers. No prizes for guessing that Berg.

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  • averageman:

    29 Apr 2014 4:00:55pm

    Petit charlot!

    woof woof, here comes the IPA's guard dog to defend his masters' livelyhood!

    grow the pie, trickle down will lift all boats..!

    No amount of well supported evidence will sway the little free-marketeers.

    "It's remarkable how many hidden assumptions and unexamined ideological preferences surround the entire inequality debate."

    Now coming from the failed journos/half-economist (oh, sorry "fellows") of the IPA.. it's a hoot!

    Thank you for the entertainment.

    Uncle Martin

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  • BJA:

    29 Apr 2014 4:01:01pm

    It seems to me pointless to go on repeating the "what is needed is not a better distribution of the pie but a bigger pie" story endlessly.

    This was first put to me by Mr Kevin Cairns, Fed Min. for housing in the Gorton Government - I think. It was false then and is still false know, for the reason that if there is inequality this brings with it all the same problems irrespective of the amount to be distributed.

    In Plato's Republic Book V111 is:

    "---and hence there will arise dissimilarity and inequality ------ which always and in all places are causes of hatred and war"

    The accuracy of Plato's statement is borne out over and over again by all relevant historical evidence ever since.

    I'll take Plato and 2,400 years of historical evidence rather than the opinions of Messrs Kevin Cairns, John Howard and Chris Berg any time.

    This opinion is only ever expressed by those on "top of the heap" - never by those with the short end of the stick. That is because what is wrong is the inequality itself - there is not some arbitrary figure of with what people should be contented - decreed by the likes of Howard and Berg.

    That is idiotically arrogant. Are we supposed to know our place, are we?

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    • Desert Woman:

      29 Apr 2014 5:33:49pm

      Good stuff BJA. Then we can add that we also have more recent scientific studies of the consequences of inequality and we also have a planet crumbling around our ears because we have already exceeded her limits. I think it's pretty conclusive, once again, that the IPA publishes a lot of nonsense.

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    • MJLC:

      29 Apr 2014 5:52:36pm

      Any man (or woman) who quotes Plato is a friend of mine BJA. Pliny (Book VII, 40, 131) could also be useful here; "Nemo mortalium omnibus horis sapit" (loosely translated as 'None among mortals is wise all the time'). I couldn't find anything equally as stirring about people who were unwise ALL the time though - I guess Pliny just thought they were idiots, and left it at that.

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      • GrumpyOldMan:

        30 Apr 2014 9:24:41am

        MJLC comments on Pliny's writing by saying ... "I couldn't find anything equally as stirring about people who were unwise ALL the time though - I guess Pliny just thought they were idiots, and left it at that."

        So now the 'freedom of speech' movement driven by Berg, the IPA and Brandis wants these 'idiots' to run the world and suppress the 'freedom of speech' of the 'wise' amongst us who base their thoughts on evidence, not ideology or self-interest.

        If there can ever be a threat to democracy and a sustainable, peaceful and egalitarian global society, it is Pliny's 'unwise' and their rich and greedy ideological power base.

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  • Mental Midget 2014:

    29 Apr 2014 4:02:58pm

    Education is the key to progression, not confiscating wages.

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    • Kate Emerson:

      29 Apr 2014 5:57:39pm

      Ah, but here we hit a snag. The Liberals and the IPA are not particularly interested in educating the masses. The Liberals are ideologically opposed to helping the poor and the IPA are great believers in user pays so think that public health and education etc are people getting something they don't deserve. This is why the Liberal Govt. doesn't want to fund Gonski and why Mr Pyne is taking to universities in the name of freedom. But he's being disingenuous. It's in the name of the free market.

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      • Mike:

        29 Apr 2014 10:41:09pm

        Indeed conservative ideology relies on a large enough portion of the population not being educated enough to question what conservatives say.

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        • Waterloo Sunset 2014:

          30 Apr 2014 9:59:48am

          Actually, we rely on lifting standards for individuals, so that they can account for themselves, and not be frightened of union bikies.

          Relying on a portion of the electorate that are uneducated, would be suicide, since it put's a strain on welfare. That's the reason that Labor get votes, because the perception is that one can get paid for loafing.

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        • Ann:

          30 Apr 2014 1:40:28pm

          So you DO want free education even up to the tertiary level?

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        • Aeon:

          30 Apr 2014 3:36:48pm

          "That's the reason that Labor get votes, because the perception is that one can get paid for loafing."

          It is pretty obvious that the richest in society tend to loafing the most because they can afford it. They also tend to greed, exploitation and corruption more otherwise they wouldn't be filthy rich, but I guess it won't stop you from straining at gnats and swallowing camels.

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      • NotIdefix:

        30 Apr 2014 9:53:09am

        Ah, but here's a snag: not everyone is able to be educated/trained to do high value work.

        The elephant in the room that we all start looking at sooner or later is a limit in abilities of a sway of the population. Many a study shows that such abilities are genetically inherited to a greater extent and any discussions on such matters quickly converge on rehashing eugenics-based philosophies and the associated name calling that affirms Godwin's Law.

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      • burke:

        30 Apr 2014 11:13:48am

        Wasn't the previous government taking money from unis? Didn't Pyne restore it?

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      • Rae:

        30 Apr 2014 4:07:41pm

        I just wish the IPA would extend the user pay thing to Capital paying a fair share for Labour.

        If wages had not been in declined for the last few decades we wouldn't have a problem.

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    • Monty B:

      29 Apr 2014 7:54:05pm

      A good start would be stopping ?confiscated wages? going to private schools. Just another form of non-means tested corporate welfare.

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      • Whitey:

        30 Apr 2014 3:33:06am

        Does it cost society more, or less to help private schools? If we assume that people would still send their kids to private schools, no matter what it costs, then we shouldn't fund private schools. However, if reducing funding to private schools means we have to fully fund a lot more children's education, then funding private schools makes good economic sense. I suspect that funding private schools costs tax payers less, rather than more, as parents still provide 60% of educational costs. The majority of people using private schools are not super rich, as let's face it, that's only 1% of the population! They are often very much working class who are prepared to make sacrifices to see that their children have better opportunities than they had. My other point is that the majority of our tax still comes from the top ten percent of tax payers, so unless that is you, then it's probably not your "confiscated wages" being used.

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        • Monty B:

          30 Apr 2014 7:47:42am

          I agree that many people using private schools are not super rich.

          Therefore if public funding was reduced private schools would be faced with a choice;- To adjust their fees in line with genuine free market forces (usually a popular idea with Tories) and/or find some efficiencies to lower their costs. For example less emphasis on swimming pools and rifle ranges, and more on working bees, sausage sizzles and making more use of parent volunteers.

          All children deserve the same funding, as do all older people, yet we means test the pension.

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        • Michael:

          30 Apr 2014 11:24:18am

          It's a fact that public schools receive more government money than private schools. To reduce public school funding would push more children from private to public schools and cost the public purse.

          Remember that public schools are primarily funded by the State government, where the opposite is true for private.

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  • PK:

    29 Apr 2014 4:06:13pm

    "Good news for the poor, and all thanks to economic growth"

    Actually, all thanks to the union and labour movements, pal. If not for the struggle of the ordinary people through the union movement and their labour and social democratic parties - and the communist and other more left wing parties and organisations - we would still be living in sub-standard housing working from dusk until dawn for a pittance. Am I wrong? Gina Rinehart called for more oversea workers under visa to work in the country and continues to lament how much it costs her for one of us to be a cog in her big wheel. Down with Mammon, up the workers.

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    • Jimmy Necktie:

      29 Apr 2014 5:59:20pm

      "Am I wrong? Gina Rinehart called for more oversea workers under visa " Yes, you are wrong. She said low paid workers in other countries make Australia less attractive to investors. Read what you like into that, but it's true.

      And are you saying Gina does not work?

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      • Kate Emerson:

        29 Apr 2014 6:49:12pm

        You're so funny Jimmy, i think you must be a stand-up comedian. Gina has never worked. She inherited a fortune ($125million and about 4 iron ore mines to start with) and has plenty of underlings to do the hard graft. Telling other people what to do and having meetings with bankers isn't really hard work. You are a one man band trumpeting for the rich, but what do you get out of it exactly? Oh and it's you who are wrong. Gina can compare us to low paid societies elsewhere all she likes (Africa is a favourite of hers) but you and she both forget, just as wages are lower in those countries, so is the cost of living. Just a little fact to put up against your factoids.

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        • Graham H:

          29 Apr 2014 7:34:04pm


          Is the cost of living lower ?Really ?

          Can you check power and fuel charges for starters.

          Maybe its just places like africa don't feel so entitled.

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        • Kate Emerson:

          29 Apr 2014 9:27:08pm

          Yes Graham, compared to wages, the cost of living in many African nations is cheaper than here. It has to be, since wages are so low. The Australian lifestyle is much better, since many people (but by no means all) have the means to afford good food and accommodation etc. A lot of Africans don't have cars-they can't afford them on their small wages. To suggest that Australians can live on African wages supposes that we will all live in mud huts or shanty towns. Which would suit Gina but maybe not the people. And it really is like that in many parts of the African continent and people are prepared to work very cheaply just to have a job.

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        • Victor in Africa:

          30 Apr 2014 1:50:17am

          You obviously have never been to Africa. In fact, I would hazard that you have not even been out of Australia your comment is that foolish.

          Also, African countries receive a pittance in mining investment compared to Australia. This is because of the higher tax in Aus, not despite of it. Good quality roads, ports and power stations don't build themselves, quality workers don't train themselves, illegal miners don't leave the staked out leases because they feel like it...

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        • Monty B:

          29 Apr 2014 8:01:32pm

          To be fair she did make some key decisions that increased the wealth she inherited. A fairer analogy would be that of someone standing at a roulette wheel, betting with someone else`s money, doing really well, then looking down on everyone else who drinks or smokes or wants a say in their wages.

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        • Whitey:

          30 Apr 2014 3:42:16am

          I've often wondered at people's obsession with Ms Reinhard. Firstly, she made the majority of her wealth by being very good at business, and the growth of her wealth has provided lots of people with jobs that pay well above weekly earnings. She is hardly the owner of sweat shops. The other point is that as a mine owner, she part of the old style economy, subject to high taxes, with assets that she can't easily move around the world. The more interesting uber rich are people who own " intellectual property " companies, like Google, or Facebook. They have few employees, few fixed assets, the ability to shift money around the world, an income that is global, and hardly pay any tax. Most of Gina's wealth is in assets, and their potential value. A down turn in mining will mean that she will be still rich, but maybe not ?ber rich in a few years.

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        • burke:

          30 Apr 2014 11:16:28am

          I bet Gina works harder than you do. You seem to have an extraordinary "hate the rich" attitude that distorts your view of life.

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      • Blzbob:

        30 Apr 2014 12:09:23am

        If scheming is work then I guess she must, but I doubt she ever does any actual physical work, or certainly nothing that would be worth thousands of dollars an hour.

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      • PK:

        30 Apr 2014 8:37:19am

        That is exactly what I'm saying - what does she do? What degrees does she hold? What particular expertise does she have apart from inheriting Daddy's assets?

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        • Applaudanum:

          30 Apr 2014 11:40:15am

          Further to PK's questions: When Gina makes business decisions, upon who's advice does she rely upon?

          Or are we to assume she does all and knows all, straight from personally accumulated pools of her own talent?

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    • Aquila:

      30 Apr 2014 7:53:31am

      PK, yes, you're wrong, at least in part. Without economic growth over the last couple of centuries most of us would be peasants and serfs, with little chance of organising a union.

      And even if we organised a communist-style revolution, experience tells us that rises in our standard of living would have to wait until we were ready to allow a capitalist system to flourish.

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  • Andrew C:

    29 Apr 2014 4:09:09pm

    Of course!!

    Why didn't we think of... wait, what?

    The whole point of the argument is that GDP growth is now going almost exclusively to the rich, plus they are also taking even more that previously was apportioned to the middle classes. That's the problem!!!

    Saying we need more economic growth completely misses the point of Picketty's argument. We need to fix who gets the growth, because at the moment its fat cats only.

    Chris has completely ignored this fact because it doesn't fit into his ideology.

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  • whogoesthere:

    29 Apr 2014 4:12:55pm

    blah, blah, blah

    Unless someone works out how to have never ending growth on a finite planet we're stuffed. The only alternative is for humanity to learn to live without growth of population or consumption.

    I think we're stuffed.

    Also, 'established permanent class of the super-rich' makes democracy redundant. When the super rich can control the politicians either overtly or covertly we've waved bye-bye to 'Government for the people'.

    The super rich have always wielded huge power, I think that will just keep increasing. So to 'wealth inequality will lead to political turmoil, even revolution', well it has many times in the past.

    Civilisations rise and fall, I epxect our will too, maybe the next lot will learn from our mistakes.

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    • Jimmy Necktie:

      29 Apr 2014 6:03:54pm

      "how to have never ending growth on a finite planet "

      Recycling. It's a multi billion dollar industry and growing. Did you know a typical computer RAM board has about 45 cents worth of gold in it?

      And it's not quite a finite system as we have energy input from the sun.

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      • Dove:

        29 Apr 2014 7:01:10pm

        The flaw in your plan, JN, is that it's free

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      • Desert Woman:

        29 Apr 2014 7:03:09pm

        Jimmy, it is an open system but I don't know any science that shows that while dynamic, it is infinite, or that many of the resources on which we depend are anything but finite. I applaud your emphasis on recycling but would remind that the oceans are dying and our land based animals are also experiencing an accelerating extinction. I don't think recycling a few minerals is going to help provide the living ecosystems in which we are immersed.

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        • Blzbob:

          30 Apr 2014 12:22:39am

          The core of the planet is full of valuable minerals.

          All Jimmy has to do is work out some way of burrowing down through all that molten magma.

          no doubt he will build massive freezer units and use up all the planets reserves of fossil fuels to solidify the magma allowing it to be tunnelled through.

          but not to worry, if we run out of fossil fuel he will start running his freezers on uranium, because there is plenty of that in the Earth's core also.

          See, ... problems all solved.

          You can do anything if you don't give a damn about the consequences.

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        • Whitey:

          30 Apr 2014 3:50:51am

          DW, at some stage growth will slow, because of resource constraints, and when it does, wealth will be redistributed, or there will be revolutions. The idea that that time is now, rather than a hundred or a thousand years will depend on science to continue to show how to harness relatively cheap energy. If something like Low energy Nuclear Reaction becomes a real possibility, the end to growth may be a long way away, but if we are already at the end of quick growth fuelled by relatively cheap energy,then it may be sooner than people think.

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        • Desert Woman:

          30 Apr 2014 9:06:07am

          I wish I could share your optimism Whitey but we need a lot more than cheap energy even if we did manage to pull off a radical new source or used solar effectively. We are watching the early stages of ecosystem destruction and decline and it's on an exponential curve.

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      • whogoesthere:

        29 Apr 2014 7:08:50pm

        You still need energy to recycle. Until we come up with a new energy source, we're still stuffed !.

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      • MJLC:

        29 Apr 2014 7:09:26pm

        I think you may have meant "self-contained" (or some variant thereof) rather than "finite" in relation to systems JN.

        Strictly speaking the Sun's energy (measured daily or the lifetime total) is, in fact, finite.

        Also, strictly speaking, both you and WGT are correct - the only problem was the omission of the word "human" in the sentence you quote. This "growth" rubbish much spouted by the Berg collective ("Resistance to inequality is futile") will, ultimately, lead to our species being recycled back into the common resource pool for the benefit of the tapirs, or otters, or coleopterans, or whatever will be the next to be elevated through evolution to getting a shot at running the joint.

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  • mikk:

    29 Apr 2014 4:13:29pm

    Never ending growth is impossible on a finite planet.

    Already we are exceeding the limits of sustainability in numerous areas.

    Berg and his right wing comrades have fooled us over and over again with their economic fairy stories. It is time we held them to account for all the times they have been wrong and stop giving their self serving, wishful thinking theories anything but contempt.

    Even fortune tellers get it right occasionally.

    Oh and as for mr bergs assertions about the 10% - They are the lackeys who actually do the dirty work for the 1%. CEOs, bankers, politicians etc etc. They may not be the filthy rich but they support, protect and agree with the 1%.

    Solidarity is the answer. Always has been. Always will be.

    When the 90% stand together no amount of money will be able to resist.

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    • Andrew:

      30 Apr 2014 11:03:16am

      >Never ending growth is impossible on a finite planet.

      Already we are exceeding the limits of sustainability in numerous areas.

      Totally agree, but it's not only the right wing pretending this isn't a problem. Labour has said nothing about it either.

      The only glimmer of reality on this subject has come from the Greens (and from forums like this, where we all prattle on about it uselessly without ever getting organised).

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      • rumtytum:

        30 Apr 2014 11:50:54am

        Regrettably, Labor is also the Right wing. The Greens are slightly right of centre. In Australia there is no left wing.

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        • A Phibes:

          30 Apr 2014 1:21:27pm

          Are you kidding? What planet do you live on? By world standards, Australians are recognised as left-leaning in general, even though most would claim we are "center". Our so-called hard right (eg Liberal party) are left of the US Democrats for cripes sake. Get out in the real world before sprouting your ridiculous comments.

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  • CJB22:

    29 Apr 2014 4:15:23pm

    I have no problems with accumulating wealth but I think there should be limits. I get scared when somebody gets too much power merely because they have used the system to get so much for themselves (with the emphasis on "for themselves"). The scary thing is that once a threshold of wealth has been achieved, future accumulation of even more becomes easy and in many ways wasteful. I mean how many cars, houses, boats, planes etc can you get before you are satisfied? You are accumulating for the satisfaction of owning more, you are accumulating because you can and for the power and influence it brings.

    I have a great objection to offspring inheriting massive wealth. They have done nothing other than have a particular parent to justify that wealth and more importantly the power that goes with it. I think it is unfair for these super rich to use a massively disproportionate share of the world's finite resources. Private planes etc spring to mind. I suppose paris Hilton is a prime example of what I am trying to say.

    People should be able to accumulate enough via their work to lead a very comfortable life live. After that it should be shared via the government. Yes, I know that isn't perfect but it is better than the alternative.

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    • SueB:

      29 Apr 2014 6:50:54pm

      CJB22, are you going to decide how much is enough to lead a very comfortable life? How much is too much to accumulate? Should savers be penalised and wasters be rewarded? I think your idea is silly.

      Why would anyone work harder to provide a better life with more advantages for their families if you had your way?

      Work hard, save hard, spend wisely is my motto. Pay the taxes charged to you by a democratically elected government to provide education, health and protection for the populace, and the rest is for me to decide what to do with.

      The politics of envy is everywhere. You and the government can keep your hands away from what belongs to me after my obligation to society is paid. I'm leaving what I worked and saved hard for to my kids and their kids.

      Your kids will have to rely on you.

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      • Demack:

        29 Apr 2014 10:06:26pm

        I agree SueB - very well said. I love your motto! Some people who drink, smoke and gamble their whole lives wonder why they end up with no money.

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      • Wilc:

        29 Apr 2014 10:41:36pm

        I must admit that I am tired of the savers versus wasters arguments along with the work hard school of thought. It's up there with I did it all myself school of thought.

        Some people spend all they earn because they don't earn very much and collectively as a society if they didn't , maybe you wouldn't be able to save any money because it's their consumption that drives our economy. I sometimes think savers are parasites on the rest of us getting a free ride based on societies consumption. You should be thankful for wasters.

        Working hard... I am sick of that term I see lots of people working hard for very little return, compared to others. Working hard doesn't equal financial success in many cases it's a matter of survival.

        I would argue that you and your family are getting a free ride in Australia everyone else consumes creating jobs and surplus income for your family to save .....while you share in the benefits of what all our taxes pay for and you want more and more...and more :)

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      • chalkie:

        30 Apr 2014 5:21:42am

        The issue is that the wealthiest are NOT taxed enough. Wealth of the top 1% has trebled as a share of total wealth, yet they have not worked three times harder, your sole rationale for personal enrichment and inherited wealth.

        Clearly the rent society charges for the opportunity for a few to get very rich is too low: otherwise the relative ratio of wealth in each decile of the population would remain pretty much the same.

        Ergo, tax the rich - it is only fair!

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      • Ann:

        30 Apr 2014 1:53:27pm

        Yeah, SueB I will decide how much is enough to lead a very comfortable life. 20 million. Just decided that there. 20 million in the bank and then anything you earn over that is taken by the government. "Oh but then they'd stop working", you wail. Oh good, a job opportunity has opened up for someone who doesn't have 20 million. Next!

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    • paulinadelaide:

      29 Apr 2014 6:51:06pm

      CJB22 - I very much doubt the super rich are particularly troubled by baubles, such as houses, cars etc. Their driving ambition is to protect & grow their capital. And they do go broke you know. They are also controlled by the laws of the land. It's only pretend super rich such as the ICAC mob that believe they can buy power.

      And in your world it appears public companies have no limits to growth whereas private companies should. Is there a difference? Should public companies also have to cede say half their wealth every generation?

      Ongoing accumulation of wealth is not easy. It's a hard slog.

      And why should offspring be void of their parents wealth while whoever gets busy sharing it around. How is the general population any more worthy? And the general public get a lot of jobs from the super rich. What happens to those jobs when their wealth is taken by the government?

      Basically I think you have 2 choices - accept it or get super rich.

      Personally I don't care that there are people with unbelievable amounts of wealth, I don't understand your concerns.

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      • Ann:

        30 Apr 2014 1:52:18pm

        paulinadelaide I can see that if we lived in ancient times you would be one of those who said "look either pick up a sword and start killing people or accept you're gonna get slaughtered". Live by the sword, die by the sword, my friend.

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      • Benny:

        30 Apr 2014 3:23:10pm

        Not really a constraint to have to obey the law of the land if you have a major political party in your pocket writing the laws around you.

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    • Harquebus:

      30 Apr 2014 9:32:34am

      I think that, once someone has earned a certain amount, they should take a forced holiday and let someone else have a turn.

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  • Alpo:

    29 Apr 2014 4:15:41pm

    1) Economic growth increases the available wealth.

    2) The greater the wealth of a country the higher the costs of living.

    3) The greater the skew in the income/wealth distribution among the population, the stronger the effect of high costs of living on the lower percentiles of the income distribution.

    4) Some in the lower percentiles of the income distribution may still float somehow, and they may even compare favourably with their grandparents (although not necessarily so). However, others will just sink under the pressure of high costs of living and low income.

    5) It's not funny being poor in a rich country!

    ..... There you go, back to reading Keynes.

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    • David H:

      29 Apr 2014 7:13:02pm

      When I was a kid in the 60's we didn't have a car. We had a phone but not that many of our neighbours and friends did. Holidays occurred within 100km of our home. We got our first TV when I was 13.

      Today everybody has a car, phone, mobile, fridge 42in plasma telly and 1m Australians take overseas holidays every year. Four Corners ran a teary story abut a couple in Western Sydney having their home repossessed. It was a 4br 2 bath 2car and swimming pool Macmansion. Everyone wants affordable housing within 10km of Circular Quay and if you can't afford it, some lefty charity will blame Tony Abbott.

      Trendy lefties have redefined "poor" in terms of ratios. So Australia, to quote Jesus, will "always have the poor". They have less poverty in North Korea than us if you follow the index used by lefty activists to define poverty.

      "Percentiles" is such a convenient piece of doublespeak.

      It's not funny living in a country where the wealth creators are so criticised and mocked. You can't redistribute wealth unless you incentivise someone to go out and create it first.

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      • thinkandthinkagain:

        29 Apr 2014 9:02:30pm

        Ah the old 'back in my day' remark. There is no point in telling only part of the story.

        You cannot pretend that society and its technological advancements aren't rolling ahead whether people like it or not and people aren't exactly at liberty to exclude themselves.

        Do you know anything about modern university? Students sit in classes banging away on laptops and tablets as they are lectured to by their teachers. All of their course content is located on online university systems after all, so internet access and owning a tablet or laptop is a necessity to go through university.

        If you have or know any kids in high school, then you should know that they too must submit their assignments as typed printed documents. Given that alone, there is a requirement for families/students to own a printer, tablet/laptop/home computer and to have an internet connection. No option of being educated without it, so it isn't exactly a choice. Got more than one kid/student in the house? Probably going to need a wireless router. Then you can ad to that the cost of any software required for school/the degree, internet security, ink and paper for the printer, any accessories needed for the computer/laptop. You'll have to pay to update any required software routinely. Then you can expect to have to replace the hardware after a disappointingly short period of time when it fails one day after the expiration of the warranty.

        Good luck telling an employer that you choose not to have a mobile because of your 'pro-saving' mentality and therefore cannot be contacted except by landline or perhaps post.

        This is just a snapshot of an example of how the technological advancement of the modern world has forced people to keep up, so it's quite nonsensical to claim that it always comes down to peoples personal extravagance and desire to live beyond their means.

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      • Treetop:

        29 Apr 2014 9:47:46pm

        When the rich get richer and the poor get poorer , in the long term both the rich and the poor lose , because , the rich mostly get rich by the process where goods or service are sold for a profit and if the poor don't have any money to spend on their products or services then the rich will find that their income also drops .

        Supply without any demand does nothing to create an economy that is successful .

        Some of the poorest countries in the world have a small minority of super rich and a large majority of very poor .

        Government intervention can make an economy more successful where everyone gets opportunities to improve their life style and in the long term everyone becomes the winner .

        If a business paid everyone just enough to survive on which is only the basics of life and then every other business done the exact thing , then just about 95% of all businesses would collapse as most businesses make their profits selling non-essential items .

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      • Whitey:

        30 Apr 2014 4:02:19am

        Even in the immediate post war period, most people didn't have phones, refrigerators were very expensive, houses were mostly very small simple and cheap to build. Toilets were " down the back", kitchens didn't need many cupboards, etc. the trickle down effect has been proven by the huge increase in general living standards in the last half century, unprecedented in history. There has always been mega rich, but our generation is first where almost every one is rich by the standards of not long ago.

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        • Alpo:

          30 Apr 2014 8:55:10am

          "the trickle down effect has been proven by the huge increase in general living standards in the last half century"... No, since WWII we have had greater material wealth (in the West especially) because of technological advancements spurred by science and because during most of that period such governments adopted a broadly Social Democratic approach to matters dealing with the administration of their country. All that started to change in the late 1970s-early 1980s with the advent of the Neoliberal madness that spurred an artificial growth based mainly on speculation, fancy finances and debt. All came crumbling down with the GFC and now the mythical wealth of the West is slowly fading away (see the levels of unemployment in both the EU and the USA)..... Once again, it will be up to a Social Democratic system of government supporting new technological and scientific innovation to rescue us from the current debacle.

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        • Whitey:

          30 Apr 2014 10:40:23am

          Alpo, real median incomes (after inflation) grew strongly during the Howard government. Housing wealth, and low inflation and low interest rates meant that many people spent more than they earned, and household debt levels grew during this time too. In Australia, median incomes have still increased since then, although I think the mining boom distorted real income declined a little since the GFC. Interesting, some claim that real median living standards may have peaked in the US, but that is relatively subjective, and not necessarily supported. As to "Neoliberal madness", this precipitated a huge increase in global wealth due to free'er trade, but advanced economies like ours haven't benefited nearly as much as developing economies. If the whole world had a socialist agenda, and a world government, I've no doubt we would have to adjust to much lower living standards.

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        • Alpo:

          30 Apr 2014 11:17:45am

          Whitey, I never mentioned "socialism", rather it's "Social Democracy", which is very different. Free trade did contribute to somehow lifting the standards of living in some social sectors within third world countries, but not all sectors, and not all of those countries, benefitted. Moreover, the lowering of trade barriers has had the result of decreasing the standards of living in some OECD countries, not increasing them. To a great extent this is the result of the increasing skew in the income distribution curve. Finally don't forget that the "real median incomes (after inflation)" are based on official estimates of inflation rates. How much do you trust our official estimates of inflation rates as compared to the real-life changes in prices and costs of living as experienced by real families? The greater the real inflation (and general costs of living) the lower the "real median incomes" are, which is what most real people in Australia are experiencing right now.

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        • Applaudanum:

          30 Apr 2014 11:47:05am

          Something doesn't 'to add up, Whitey. If real incomes rose, why did people need to rack up so much more debt than previously? Why didn't the rise in income cover their costs?

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        • Whitey:

          30 Apr 2014 1:34:44pm

          People accrue more debt for lots of reasons. Investment, realizing some of their increased equity for a trip to Bali, who knows. We can't assume the increased debt means an increased cost of living, it could just mean money was cheap to borrow, so people did.

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      • Greg:

        30 Apr 2014 8:23:53am

        And someone cannot create wealth unless they live in a society that is stable and condusive to them creating it. For that you need strong social services, low crime/corruption, opportunity and fairness.

        When you have super rich barons buying political power, the mining industry bringing down prime ministers with advertising campaigns because they don't want to be taxed, and other wealthy interests buying the society they want instead of negotiating for it with their countrymen. Sadly, Australia, like the US, is moving too far to oligarchy.

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      • Ann:

        30 Apr 2014 1:56:09pm

        In MY day we ate sticks for breakfast, boiled sticks, and we were so happy that it wasn't boiled rocks. Harumph parumph pafoobaly, is basically all I heard from your post. There's this little thing called "economies of scale" maybe you should look it up, which would explain to you why everyone today owns a big TV, while when you were a lad no-one did. It may have had something to do with it not even being a thing when you were born. Just sayin'.

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      • Grasshopper:

        30 Apr 2014 2:27:33pm

        Wait a minute...You guys could afford a home?

        Wow, that must have made paying off the cost of your studies much easier!

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  • Rob:

    29 Apr 2014 4:16:23pm

    'We should fear slow growth-not inequality"

    If it is slow growth Chris and the IPA fear than they had better withdraw their 137 or so wish list of cut backs to Tony Abbott.

    As the institute for Dynamic Economic Analysis says- 'the current political obsession with reducing sovereign debt will exacerbate the sustained slump in economic growth'

    Chris would also so need to explain why we got where we are- did lending by the financial sector over the past two to three decades that primarily financed speculation rather than investment have anything to do with it?

    And just HOW does he propose to 'grow' the economy when costs are such a factor and households have debts of 150% of disposable income?

    Does "growth" reduce inequality? I think it was Pope Francis who said there is not point in overflowing the glass if most of it goes to the few. Crumbs for the masses?

    The penny has not yet dropped for Chris-the Government and many others= in a finite world- ongoing exponential economic growth is NOT sustainable. Besides technology with the merging of communications-renewable- nano and robotic technologies is already moving to a zero marginal cost society.

    What we should fear is continuing and rising inequality because of the barriers put up by the likes of the IPA,vested interests and compliant Governments to the reform of society to a fairer, more civilised,cleaner, more collaborative world

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  • sleepykarly:

    29 Apr 2014 4:16:55pm

    This poor excuse for a thesis by Berg has more holes than a colander! But let me take just one; the contention that the 'r>g' relationship can be solved by more growth.

    What piffle! Anyone who observes Capitalism as it is practiced (and contrary to the ideological fantasies of neo-conservatives) knows that more growth is inevitable skimmed by those in a position to do so. Just check out the Big Banks, who insist that anything less than 15% return on paid-up capital makes a bank 'too vulnerable'. Even with a government guarantee of their continued solvency!

    The fact is that in low-growth times the Capitalists simply go on strike until governments are forced by their voters to apply a stimulus to get the economy going again. That is when the rent-seekers come out of the woodwork.

    But in high-growth times, the Capitalists skim for all they are worth! Just check out how so much of the recent 'minerals Boom' has enriched mining companies, while manufacturers and tourism has died.

    The poor will always be price-takers, the rich will be price-setters, and they will do this as mercilessly as a democratic system will allow. And Berg and his ilk will always be there, arguing that ANY 'interference with market forces' is an abomination unto Lord Mammon.

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  • Mike:

    29 Apr 2014 4:21:42pm

    Singing from the sane song sheet as Tony Abbott. Never mind if the rich get richer and the poor get poorer, that's not important so long as we have more growth.

    "In the end, we have to be a productive and competitive society and greater inequality might be inevitable."

    - Tony Abbott, 2003.

    The real danger of the 21st century is economic neoliberals thinking that society is a market and growth is an end in itself.

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    • SueB:

      29 Apr 2014 8:00:37pm

      I don't get that you think the poor get poorer. Can you explain how that is so?

      I thought all Australians have become richer over the years.

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      • Ann:

        30 Apr 2014 1:58:39pm

        Well SueB, can you explain then why first home buyers are in record low numbers? Could it be that they are now not rich enough to afford a home? That sounds like the poor getting poorer to me.

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    • Harquebus:

      30 Apr 2014 9:29:19am

      The real danger is resource depletion while populations are growing. Crude oil depletion being the greatest danger. Modern agriculture is the process of turning fossil fuels into food.

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  • jks:

    29 Apr 2014 4:21:54pm

    So we have the Libs introducing a substantial new tax targeting only high income earners, and the Greens and Labor have vowed to block it. Welcome to bizzarro world.

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    • rusty cairns:

      29 Apr 2014 6:48:21pm

      GDay jks

      It seems we have a government that wants all to do the heavy lifting but wants most of the lifting to be done on the backs of those that already have broken backs.

      Gee there has been a big change in views in the LNP, when in opposition they voted against means testing the health insurance rebate, which meant heavy lifting (paying full cost of health insurance) by those that can afford it.

      No great big new taxes they cried, they assured they had the plan to bring the budget back to surplus by reducing taxes and targeted efficient spending.

      Whoa but now we find it needs a new tax (levy) to fix the budget, yet they opposed a levy to rebuild infrastructure destroyed by a natural disaster.

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    • SueB:

      29 Apr 2014 6:55:09pm

      The Greens and their sidekicks are like children.

      They ought to jump at this opportunity and thank Abbott for doing what they never had the guts to do while in government.

      The increase in tax should stay in place until Swan's/Rudd's/Gillard's/Green debt is repaid in full, just like the last time the ALP got their hands on the purse strings and borrowed to buy votes.

      And maybe even afterwards, until Australia has some money in the bank again.

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      • Pop:

        29 Apr 2014 10:36:14pm

        In fact SueB the levy should be named after Swan himself, the "The Swan Levy", a justly reminder of never fudge the figures

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        • rusty cairns:

          30 Apr 2014 9:33:10am

          GDay Pop

          I think the title should be "No more great big new taxes Abbott broken promise levy"

          Or "We didn't budget for the $2.9 billion direct action plan, now we need money levy"

          That stamp like thing on almost every page of "Our Plan" stating "fully costed budgeted" fooled you didn't it ?

          Mmm treasury forecasts were not achieved. What figures were fudged ? MRRT was negotiated and any royalties paid to the states were to be taken from MRRT. Then 3 states increased the amount of royalties to be paid and complain when they receive less of the GST take.

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      • jusme:

        30 Apr 2014 6:26:32am

        I'm in tentative agreement with you SueB, but until I see the details of the new debt tax I can't be sure if this is good or more coalition poor bashing.

        I've read that only those earning over $80,000 a year will have to pay it. If that's the case then it shouldn't hurt any truly struggling people.

        Presuming it's what it seems, IMO Labor and the Greens should allow it to go through.

        They can still point out that it's another major broken promise, and that it proves the 'lefts' point that the only way we can have a stronger economic system is by taxing the rich more progressively, like the 60% highest bracket we used to have in the post war boom times.

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  • AT:

    29 Apr 2014 4:22:32pm

    "[Piketty] has carefully investigated high-wealth tax returns in Europe and the United States..."

    And what have you done to refute his conclusions, Bergy?

    Nothing really. Just dismiss what you find objectionable with what amounts to little more than anecdotes.

    You're way outta your league, mate.

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  • Sir Robert of Lindsay:

    29 Apr 2014 4:26:23pm

    Unsurprising - a research fellow from the Institute of Public Affairs putting such a high value on economic growth at the expense of the lower economic groups. And of course when Bergs New World Order takes effect the biggest benefactor of it will be the poor and down trodden who will reap the benefit of trickle down economics.

    Unfortunately, for a research fellow Berg has such a poor grasp of history. The old adage about what goes up must come down still applies to the economic cycle. Continued growth must at some stage become unsustainable, and it always those on the lower socio-economic level that bears the brunt.

    We have been lucky enough to over-ride this cycle since about 1991 through the fortunate circumstances of a mining boom and having a government in power at the time the GFC hit that had the foresight to cushion the impact. Lucky being the operative word. The rest of the world is still gripped by the boom-bust cycles of corrections all growing economies suffer, as we will be again when China decide to take it's foot off the accelerator.

    Bergs second last paragraph displays his partizan bias for all to see.

    "There are lots of progressive reasons one might want to tax a population - for instance, social services or transfer payments. But simply because the government doesn't like people having lots of money seems like a very bad one."

    Really? What evidence do you have that ANY government in this country has ever taxed the rich because they "don't like them to be rich"? Where do you come up with this rubbish? The wealthy entreperneur oils the economic wheels, even the most left leaning of folk know this to be true. The Frank Lowys and James Packers of the world employ people in the thousands, even though we might not like the way they manage their own affairs, and we know for a fact they certainly DON'T do for any ideal other than making themselves more cash. "Trickle down" economics does exist, but is it a mechanism for fairness in society?

    Berg, like all that spew from the sewer of this conservative think tank again is arguing black is white. For there to be more equality, we have to make society LESS equal. Double think at it's finest.

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    • Professor Rosseforp:

      29 Apr 2014 7:04:20pm

      When John Howard became Prime Minister in 1996, he repeated the mantra he had used as a treasurer -- that the trickle-down effect would benefit all Australians.

      That was 18 years ago, and if there has been an trickling coming my way, I haven't noticed it -- in spite of very positive economic indicators, and improved benefits for the people on top.

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      • SueB:

        29 Apr 2014 8:06:19pm

        Unless you haven't worked or have had extremely unfortunate family circumstances in all that time, I can't understand how your general conditions aren't better than they were 18 years ago.

        If the problem has been illness then I wish you had received more assistance. Genuinely needy people with illness or with sick or disabled children and adults they are caring for should have much more support than they get. They save taxpayers tens of thousands each year and deserve our appreciation and respect.

        But IMO, they're the only ones in the safety net who deserve more.

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        • Professor Rosseforp:

          30 Apr 2014 10:42:56am

          I have worked, and have had about the same amount of unfortunate family circumstances that anyone might expect in 18 years.

          Without looking at my specifics, let's look at some of the down-side that works against the poorer people waiting for a trickle:

          inflation controlled by structural unemployment of about 5%, underemployment of at least the same amount

          spread of casualisation leading to less job security

          wage rises capped or restricted due to pool of unemployed

          cost of electricity, telecommunications, housing, renting, rates, water increased by huge amounts

          cost of food pushed up by GST and other factors (yes, food was exempt but supermarkets profiteered)

          compulsory superannuation fees constantly nudging upwards

          transport costs increased

          pharmaceutical costs increased and amount required to obtain concession card pushed up each year (medical expenses as tax deductions to be removed in the next 2 years) ; cost of using non-generic drugs pushed up ; cost of medical, dental, optical services increased

          occasional levies tacked onto taxation

          So I agree that a new wide-screen television might be cheaper than in 1996, it's not a priority for the millions of people in Australia who struggle with bills, fares and putting food on the table.

          The cost of eating out or entertainment may or may not have increased or decreased since 1996. I wouldn't know as it is not a possibility in either case.

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        • Alpo:

          30 Apr 2014 1:14:55pm

          What a brilliant and truthful post, Prof. There you have put the finger straight into the bleeding sore of our collective consciousness... I hope it hurts to many, because if they have become totally insensitive we are truly stuffed!!

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      • Mike:

        29 Apr 2014 10:46:18pm

        It was exactly the same mantra that Ronald Reagan had used 16 years earlier and that hadn't worked either. The conservative ideology of "cut taxes and cut spending" didn't result in the trickle down, it resulted in a decade of higher deficits and higher debt. Julie Bishop was repeating the exactly same ideology as recently as 2010 - that cutting taxes would result in increased tax revenue. A nice economic theory that appeals to conservatives but has not, under any circumstances, actually worked in the real world. Ever.

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      • Whitey:

        30 Apr 2014 4:35:11am

        During the Howard years median income grew at a faster rate than at any time, at least in the immediate past, so unless you had bad luck, or made bad decisions, extra wealth would have came your way during that time. I would assume you now have a bigger TV, more phones, more likely hood of air con, a better car, than in 1995. That is because all these things became cheaper relative to our earning capacity. The proof of trickle down economics is in the figures, and was never more effective than in the Howard years.

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        • Sir Robert of Lindsay:

          30 Apr 2014 12:55:35pm

          Median wealth did indeed rise under Howard.

          Largely due to the massive house price increases he and Costello engineered. The problem was that that wealth increase came in the form of a massive increase in personal debt as a result.

          They deliberately withheld government land releases to drive the land price up. They increased the first home buyers grant in the knowledge EVERY house would suffer an increase as a result. Then they introduced the GST to an industry never before taxed on it's input of labour and materials. Read Costellos book on how they conned the blue collar voter to support them. It spells it all out.

          If you took out a mortgage since 2000 you have an average of around $30,000 EXTRA debt thanks to J Ho as a result of the GST alone. This doesn't take into account the extra cash you now have to fork out since the Libs "user pays" ideology became public policy for what used to be government services.

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      • Harquebus:

        30 Apr 2014 9:25:55am

        It trickles up. Currently, pauperism is passing up through the middle classes. Eventually, fiat currencies will become worthless just like all fiat currencies throughout history.

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      • Sir Robert of Lindsay:

        30 Apr 2014 12:45:12pm

        Your personal circumstances aside Prof, the trickle down effect is very real.

        The question was is it a mechanism for a fairer society?

        Hardly imho, I see quite the opposite. It seems that relying on trickle down economics is a recipe for both regression and division within society.

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    • Treetop:

      29 Apr 2014 7:43:57pm

      Before the huge shopping town complexes opened , Australia had very successful local shopping centres that employed a large section of the Australian population .

      The huge stand alone shopping centres killed off many Australian local strip based shopping centres , it started in the 1960's when large shopping towns started to be built in Australia and locally owned retail businesses started to disappear from the local shopping centres

      In the 1960's , the Australian population was less than half of the current Australian population and local owner operated businesses were very profitable and busy .

      Today most large shopping centres have become homogenous with same mix of nation or international based businesses even the locally owned bread and cake shops are disappearing and multi-national fast food stores have taken over from the local fish and chip and hamburger shops which served local fresh produce that wasn't from a frozen packet .

      In the 1960's in Australia even the department stores employed a huge staff with many staff behind every counter in every department , today often there is only one person at the main check-out with many self serve counters for customers to pay for their purchased items .

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  • Stephan the Alternative:

    29 Apr 2014 4:28:44pm

    Hey everyone, this is just more right wing propaganda paid for by the super rich to justify their position in society. As I or anyone else knows money does not make you happier and a world of robber barons that control what you eat, where you work, how you dress and how much you pay for things is terrifying. We should not expect growth anyway that is finished we are running out or resources to accommodate it anyway, we only have one world.

    To solve the income inequality problem, I think if in the rich countries we taxed everyone 80% of everything they had and gave it less fortunate countries the world be a happier place... Who is with me? We can live happily and sustainably on this beautiful blue green planet, let's all think about need not greed

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    • everyone:

      29 Apr 2014 6:15:26pm

      Thanks, we'll be in touch.

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  • John51:

    29 Apr 2014 4:29:02pm

    Chris, you are kidding, history including what is going on in the world tells at that inequality is the biggest danger. And I don't just mean in quality of life outcomes. What I mean is its disproportion impact on power, who has it and who doesn't. And because of that its corroding impact on our democracy and democracy itself.

    Inequity is a corrosion on everything. It eats society from within as it also does in eating the economy from within and who benefits from it. So sorry Chris but I suggest you go back to the writing board and find a new argument to debate. You got this one well and truly wrong.

    Growth and its pros and cons is a completely different argument. Inequity only comes into it when governments fail to understand its importance as they have under the flawed neo-liberal ideology.

    Markets by their very nature are inequitable. That means you need government to implement policies to reduce and overcome that inequity as much as possible. But when government think they are there to serve the market and not their people that is when we end up with inequity and growing inequity as we have today.

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    • Whitey:

      30 Apr 2014 4:46:15am

      While not arguing with much of what you say, you need to understand that the growth in inequality stems from mega political forces. Equality was achieved in a time of controlled national economies, and at the cost of growth. The freeing up of world trade, largely caused by technological advances rather than government policy, has resulted in huge growth, higher general wealth, and less impediments to growing individual wealth. This has meant a lot more ultra rich. The idea that we can alter this with different national policies is fancifull.

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      • John51:

        30 Apr 2014 2:54:46pm

        Whitey, we never had equality, we just had a reduction in hte very high level of inequality. And as I said over the past couple of decades that reduction in the level of inequality has reversed and is reversion at ever increasing speed.

        The trouble is you have do not appear to have understood the crux of my argument. Inequality and increasing inequality is a very dangerous thing to the stability and function of society, of nations, to the very world itself. Just look at what is going on around the world now and examples of what I say are everywere.

        Instability driven by inequality may grow wealth for a very few individuals and corporations. But it destroys wealth and with it growth for everyone else. Government policy, including government tax policy does make a difference to whether people are sharing in that wealth, or not.

        If people and if nations start to believe that they are not justly sharing in that wealth than instability increases and with it wars. As I said a few may gain from that, but the rest of us lose out even if it is not obvious to us at first.

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  • ingenuous:

    29 Apr 2014 4:29:42pm

    Mr Berg, first up, I must ask you how you propose that we achieve indefinite growth. Such a thing is impossible. Zero growth is what we should aim for. Asking us to increase growth to combat wealth inequality is irrational.

    You also ignore that humans are hardwired to resent wealth inequality. This causes unrest and (in extreme cases) revolution. We can't easily change human nature, but we can change inequality.

    So, it is indeed a problem that rich people exist at all. We don't need them, so we can get rid of them. And we should. (By redistributing some wealth, not, you know, with a guillotine or any other nastiness).

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    • Ann:

      30 Apr 2014 2:04:47pm

      This is just such an obvious fact it beggars belief that the rich don't understand it. Any student of history can see again and again that the rich don't stay rich. Why would they decide to push their luck against public opinion rather than settling it rationally and peacefully with voluntary turning over of some of their wealth? They are like a bunch of compulsive gamblers playing russian roulette for high stakes. I almost pity them.

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  • FlapDoodle:

    29 Apr 2014 4:36:06pm

    An article of narrow intellectual focus. Inequality is not about money specfically but a much wider range of socially based relative deprivations. By Mr Berg's assessment we would all be happy if we only had more money - although this, in his eyes, would not seem to include Government "because the government doesn't like people having lots of money"? Perhaps Messrs. Abbott and Shorten need to come clean on this one!

    The society in which we live does have something better to aspire to than a single minded economically aquisitive vision we have seen play out in some of the most unequal cultures of the last two centuries.

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  • Steve:

    29 Apr 2014 4:38:15pm

    Absolutely correct that it is slow growth that we should worry most about. Slow growth means high unemployment, scared consumers and frozen investment sentiment.

    Higher economic growth rates would remove a lot of the sting of seeing the hyper-wealthy enjoying their yachts and supercars.

    Higher and stable growth rates would give the poor secure jobs, higher incomes and the confidence to have a decent life without ever-present fear of unemployment. Higher growth would also make tax revenues increase and help pay down debts - both personal and national.

    Central banks have flooded their economies with cash and dropped interest rates to close to zero in an effort to spur growth. Corporates are sitting on huge amounts of cash but not investing because they can't find sustainable or profitable ways to spend their money.

    Spurring economic growth is the number one issue facing governments all over the world.

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    • ingenuous:

      29 Apr 2014 5:56:30pm

      Growth must cease. We will run out of resources to pillage.

      What then? Must we all die?

      Or should we embrace zero growth, while we have the option, rather than accept rapid negative "growth" when it is forced upon us by circumstances?

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    • DiogenesNT:

      29 Apr 2014 6:38:29pm

      Hi Steve, I hate to burst your bubble but you are well off the mark. Some of what you say creates the ills that we already face. Destruction of arable farming land, destruction of the environment, people kicked off their land and out of their houses. All in the pursuit of higher growth rates. People in Asia working in sweat shops for 10 hours a day for their $2 and the companies paying them providing unsafe work environments and buildings that collapse and burn.

      The brand names for whom the clothes are made pay a pittance for the items and sell them for obscene profits that benefit the executives and the shareholders who want bigger and bigger returns. Shareholders do not care how the profits are made, it is the pursuit of the mighty dollar. Stuff the workers, give me bigger and bigger returns.

      Sorry my friend, it is not slow growth that we should worry about most. We should care about people first, last and always. Sustainable growth is immeasurably more important than higher growth.

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  • nanowana:

    29 Apr 2014 4:38:18pm

    Inequality is still a problem for billions of the poor, not all of whom are incomparably better off than their antecedents of a century or more ago.

    And economic growth is a problem for all of us, because it is comes at the cost of exponentially increasing destruction of the soil, the sea, the forest, the rivers, and the biodiversity that we depend on. Economists need to be constantly reminded that the economy (like the human population) is only part of the ecology, and neither can grow without limit. It's physically impossible, Dr Berg. Can you do anything about that, apart from congratulating yourself on being one of the few?

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  • Sean :

    29 Apr 2014 4:38:56pm

    Your statement "However, the 9 per cent of people below that 1 per cent (that is, the rest of the richest 10 per cent) earned their wealth from income like the rest of us, not from capital investments and inheritance." is not only rubbish but an insult to "the rest of us".

    Also aren't we living in a time when increasing the rate of growth is actually destroying the life support systems of the planet?

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  • Shalashaska:

    29 Apr 2014 4:39:18pm

    In order to ensure ongoing "fast" (i.e not slow) growth, you can't afford to remain on a planet with finite resources.

    Physicists already know this.

    One day economists will have to catch up.

    I hope they do, because as Carl Sagan (I believe) put it, "space exploration is the moral equivalent of war", and if we want that ongoing growth, all the better if we get it by spending big on space exploration instead of war machines.

    If anyone needs any incentive, I hear there is a lot of iron in asteroids.

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  • Stuffed Olive:

    29 Apr 2014 4:40:30pm

    There is more to Piketty than Berg lets on - this courtesy of The Conversation: The alternative we are now facing is the return of plutocracy, as Piketty comments: ?Inequality is fine as not long as it is not completely excessive. At the end of the day, it?s hard to make democratic institutions work if you have 95% of the wealth in the top 10% of people".

    Assumptions that inequality is necessary for economic growth are largely groundless: a more unequal society fails to deliver economic growth.

    Austerity measures simply focused on reducing national debt, by reducing the capacity of other essential services such as health, education and social support, can compound inequality and further restrain growth.

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  • Todd:

    29 Apr 2014 4:42:48pm

    Spot on as always, Chris.

    I fondly remember your Christmas article that, like this article, pointed out the massive increases in the standard of living of the poorer in our society due to capitalism.

    I agree entirely that there should be less focus on the rich (envy) and more focus on lifting the living standards of the poor. Personally, I am happy to see inequality grow as long as the living standards of the poor grow. Does it matter to the guy who can now afford three meals a day instead of one that some other guy just bought a second boat? It might, but it shouldn't.

    Only the irrational emotion of envy could lead to a focus on how much more the rich have, rather then the far more important question of what do the poor have? To me, it is not helpful to bring the rich down without lifting the poor up.

    Would it help any poor person if we took the richest 100 Australians and dumped them on the moon? I argue that it would actually reduce the living standards of the poor to do that, even though it would clearly, from a statistical standpoint, definitely mean a reduction in inequality. It would hurt the poor as it is generally the investment of capital by better off people that leads to the improvement in living standards for many, through increased employment.

    Take Gina's Roy Hill mine. She is doing it to make more money for herself and no doubt she will get even richer and many will lament that fact. The point they miss is that the mine will potentially set hundreds (maybe thousands) of average workers up for life that may not have been given that opportunity if not for someone like Gina wanting to grow her wealth. Many say, therefore, Roy Hill is a bad thing because it will increase inequality statistically as it will make Gina even richer. I say it is a great thing as it will increase the living standards of thousands of battlers and arguably many more through the multplier effect.

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    • ingenuous:

      29 Apr 2014 5:58:32pm

      There is no need to support rich individuals. We can have rich corporations with many small shareholders.

      Corporations are necessary. Rich individuals are a social burden.

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      • EEL:

        29 Apr 2014 10:13:58pm

        Why are people rich? Leaving aside those who inherited their wealth (in which case the following would still apply to their ancestors), people are rich because they enter into the market supplying goods, capital and services that other people want. If there's something wrong with satisfying the wants and needs of other people, then indeed it could be said that the rich are a social burden.

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        • sleepykarly:

          30 Apr 2014 12:07:56pm

          The myth of Innocent Capital!

          Actually, most inherited wealth was gained by plunder, corruption, fraud or business practices that would certainly be considered immoral, and often illegal, today.

          And what of people who have 'earned their own wealth'? Some have just been lucky (lottery winners gifted professional athletes, speculators, etc), some are corrupt, fraudsters or criminals. But most have become rich because even if they did not inherit the money, they inherited the means to make it. Old School Ties, access to better education, parental support while studying instead of having to work part-time, better advice when young...

          Yep; even when wealth is not inherited, access to it still is.

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        • PW:

          30 Apr 2014 2:53:49pm

          There is nothing wrong with being wealthy, provided you understand that in a just society, the poor are supported by the rich. What we're seeing in the US and increasingly here, is the rich not wanting to bear the burden of supporting the poor. Witness in the US the absolute screaming by the well off about "Obamacare" which is a scheme similar to that which Australia (and Europe) have had for many decades.

          Sadly, this shifting of the conservative parties further to the right is happening here too, with the current Government unapologetically favouring the well off. It is the only Government in my memory (back to Menzies) to be so blatant about it, they even, to be fair, took it to the election.

          The one ray of light seems to be that in the US, the shifting of the Republicans further right seems to have been accompanied by a shift from them to the Democrats as the natural party in power. This will, I think, be confirmed next election, and we can only hope it is mirrored here.

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    • DiogenesNT:

      29 Apr 2014 6:49:31pm

      Hi Todd, sorry mate but you are an apologist for the IPA. This pathetic effort from Mr Berg shows no understanding of the book he is quoting. Go and work in a factory in China make brand name clothes and tell me how they are better off than their grandparents. Increases in standards of living are OK only if you can afford them. When the mine runs out and the workers leave Gina will still be rich. If the workers do not get work they will become poorer. I could keep on pointing out Mr Berg's failings in this article but I am getting tired of responding to his supporters who will in all probability not change their mind no matter how much information they get. I respect your right to free speech but you need to critically analyse Mr Berg's articles more thoroughly.

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    • aelo:

      29 Apr 2014 7:10:32pm

      "Would it help any poor person if we took the richest 100 Australians and dumped them on the moon?"

      well, yes, I actually think it could.

      If the richest 100 australians were placed on the moon, and their assets nationalised and put back into public infrastructure, education, health etc it would probably improve many things for poorer Australians.

      ...even if the wealth of those richest 100 Australians was simply redistributed amongst the population, it would then be put back into circulation and would probably provide a boost for small business as people spent it.

      I think that either of those options wouild benefit australia far more than the supposed benefits to the population from the capital investment by the wealthy. nothing to stop smaller businesses from flourishing without being bullied by multinationals, or the govt providing essential services, charging less than current providers and still making a profit. how much are they making from sydney airport?

      And just to show my motives are not envy, my share can go straight into a programme for providing a dental health scheme for low income earners.

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      • Todd:

        29 Apr 2014 9:05:51pm

        Yes, but if those small businesses flourished, you would be faced with more rich individuals that you dislike. And if you put a cap on wealth, who would risk business at all? Or would you prefer state owned businesses?

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        • aelo:

          30 Apr 2014 11:31:11am

          The point raised was that theoretically placing the wealthist hundred people on the moon wouldn't help anyone. I disagreed. I didnt make the suggestion, nor am I promoting it as an option.

          I have no problem with people accumulating wealth. I think a lot of wealthy small businesses flourishing would be an excellent outcome, and even better if they did so by using local innovation and employing locally. But the wealthiest hundred individuals in Australia have more money, more political leverage and more control over people's lives that I think is good for a functional society. And they are also in a position to control and damage their competition because of this.

          I think that essential servcies should definitely be state/federally owned. The infrastructure should belong to the australian people, and provide more opportuinites for all of the population. Private companies do not have a great record when it comes to provision and care of things like water supplies. And the minerals being mined from the ground - that's australian soil, and an australian resource.

          And you think people wouldn't work if they couldn't aspire to plutocracy? So how does that logic apply to reducing the basic wage rate?

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      • EEL:

        29 Apr 2014 10:26:37pm

        Leaving aside the obvious immorality of dumping anyone on the moon, which would, chances are, lead to their untimely demise, something which (assuming you are anti-capital punishment like most other left-wingers) you would probably not support even in relation to murderers, and also the fact that there is something called "property rights" which you may or may not be familiar with, your economic logic is also very flawed.

        1) If you nationalise the assets of wealthy people, people will be less likely to want to accumulate wealth. The only way you can accumulate wealth in a market society (apart from inheriting or stealing it) is by providing goods and services that people desire and are willing to pay for. Essentially, by dissuading people from getting rich, you are dissuading them from providing desirable commodities. Furthermore, if you make someone refrain from participating in the market, then obviously they will not be employing people. Given that you appear to be worried about the lot of the average person, the policy you propose would be entirely counter-productive.

        2) What do you mean by "supposed benefits" of capital investment? There is a certain limit to how much money can be raised through increasing debt. At some point you're going to have to either raise money through capital - which the rich are more likely to possess - or risking taking on so much debt that your company is not longer viable. The "supposed benefit" of capital investment is allowing companies to grow, to provide more services, and to employ more people.

        3) Smaller businesses are small because they are less efficient than larger multinationals. (Ever heard of economies of scale?) That is why multinationals are sufficiently large to be exactly that - multinational. Of course, there are exceptions to this, and those exceptions tend to grow into major companies.

        4) Without being subjected to the rigours of the market, the government has no incentive, and (historically speaking) has not seemed particularly inclined to act upon this non-existent incentive, to be efficient and save money. Governments are inefficient and waste money that private businesses would not pour down the drain (again, there are exceptions - exceptions which tend to become insolvent, thereby putting an end to their wasteful behaviour).

        5) If your motive is not envy, how about spite (i.e. you are so antagonistic towards the wealthy that you would be willing to cause them harm even if it does not do you any good). Even if this is not the case, and you feel that your motivations are more benevolent, that does not change the fact that benevolence is not taken into account by economic reality.

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        • aelo:

          30 Apr 2014 11:57:47am

          Well, you're economic logic looks silly to me, too, but lets try and be less rude, shall we?

          1. My response was to the suggestion made by another poster. And yes, technically I still think that if the wealth owned by the wealthiest hundred people was put back into society and recirculated, there would be an improvement for many people. I'm not advocating nationalisation of all wealth, I am very much in support of small/medium business, and a healthy, aspirational middle class. But I do think that things have become problematic atm however because too much money and too much power are concentrated in the hands of too few. Our votes are close to worthless because our politicians have ceased to represent the interests of their constituents and instead promote the interests of big business. Business needs customers, we need a middle class with income to be those customers, not just a tiny pool of superwealthy to buy a handful of luxury goods

          2. In the proposed scenario there was no capital investment through increased debt, because it was proposing an increase of capital to be invested. And if it was invested in the NBN, for example, there would a return through allowing people to use it, and increased efficiency for business.

          3. Yes, I have 'heard' of economies of scale, but it seem to me that there are then social costs to be considered, as well as looking at the effect we are seeing in regional australia where large companies have a virtual monopoly, and then start to gouge producers/manufacturers. This might make for an impressive bottom line in economic reality but it makes a mess in "real" reality - the one where people live, eat etc.

          4. Well, it depends on what you are talking about when you use the word "waste", doesnt it? And I'm not sure I agree with this - as far as i can see both govtd and large companies waste ridiculous amounts of money, but taxpayer funds just go to fill in the holes. Cadbury?

          5. well, here's where we come to the fundamental parting of the ways. Because i think that economic reality is one small part of a much greater reality, and benevolence should definitely be a factor in government, in economics, in development and in society. And I am offended that compassion is considered to be "left wing".

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    • John51:

      29 Apr 2014 7:42:19pm

      Todd, I do not know what information you base your argument on, but I would suggest it is heavily flawed. Inequality does not stimulate growth or a rise in living standards. Maybe you and Chris need to go and study history than you would both understand the folly of such an argument.

      It was only during the period of post World War 2 that the enormous inequality in the world, especially in the developed countries decreased. But over the past two decades that decrease in inequality has reversed with neo-liberal policies bringing about that reverse.

      The market is inherently about the accumulation of wealth into fewer and fewer hands. Wealth by its very nature accumulates wealth. Without government intervention we would be very quickly back to the level of inequality of the industrial revolution of the 18th and 19th century.

      On the other hand distribution of wealth into more and more hands increase the growth of wealth and shares the dividend of that wealth to more and more people. But that does not happen without government policy intervention.

      As for Gina's Roy Hill mine, please tell me why it is somehow better that the ownership and most of the wealth remains in her hands. I would have thought the distribution of that ownership of that mine into more and more hands would actually provide a greater return to the country.

      I would also have thought a greater distribution of the wealth gained from the minerals of that mine, minerals owned by the people of this country, would also be a better thing. That would actually spread the wealth generation capacity into more hands than just one or a few.

      Since when did we the Nation of Australia determine that just because her father as a geologist discovered those minerals that he and his family gained all the benefit of those minerals. After all he did not create those minerals from nothing, from thin air. They were always there. They were not going to disappear into a puff of smoke if he did not discover them when he did.

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      • Todd:

        29 Apr 2014 9:15:18pm

        So, on your Roy Hill suggestion, you suggest nationalising mines and other businesses. I think if you do a bit of digging (sorry couldn't resist the pun), you just might find that has been tried, with appalling results for living standards of the worst off. I respect your preference for state owned businesses over private, but that does not mean that my argument is flawed. It means we have different opinions on the ownership of the means of production. I am of the opinion that our worst off have it relatively good (compared with other systems) and we have always had private ownership of the means of production. Whereas, the outcomes for China's poorest are far worse than ours, yet they have widespread state owned businesses.

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        • John51:

          30 Apr 2014 2:41:59pm

          Todd, you are putting your own words into my mouth. When did I say anything about nationalisation? I didn't. What I said was that Australa, Australians, should get a better return for what is a one off resource. Once you mine those minerals they don't grow back again.

          Gina did not even discover these minerals. Her father did and the current system as it was, as it is provides too vast a return for what is in itself pretty basic ground work. So again what I argue for is a much better return for the wealth we are giving away with little in return for it.

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    • me:

      29 Apr 2014 9:39:40pm

      I think there is a trap here.

      Gina is not doing the actual work and she has limited skills.

      The miners are doing the work and using their skills to make her richer.

      It is similar to an Upstairs and Downstairs situation.

      The Downstairs servants are doing the work and using their skills to be employed by the people Upstairs who carry out minimal work and have minimal skills.

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      • Aquila:

        30 Apr 2014 7:45:40am

        Running a business is work.

        And if Rinehart has minimal skills she won't hold onto her wealth for long. Then your concern will be solved.

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      • Whitey:

        30 Apr 2014 10:55:20am

        Me, another rant against Gina Reinhard, and I'm surprised the left keeps choosing her as a target, apart from he obvious wealth. She pays wages much higher than the median, she has developed projects that employ thousands, she has helped grow the australian economy, and along with Twiggy Forest she has changed the face of WA mining away from foreign ownership to foreign partnerships, surely a good thing. She is outspoken, as was her dad, and not everyone agrees with her views, but she is entitled to have them. I certainly don't know her, or have any idea what she is like as a person, but as an institution, her company has been good for Australia. As to her skills, I think the idea that a wealthy parent means you are automatically going to be the worlds richest woman, with out doing any work is bizarre. I have no doubt that none of this just happened, and I suspect that even without a rich dad she would have made plenty.

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    • blax5:

      30 Apr 2014 10:56:34am

      From what I have read Gina's motivation was more than augmenting her wealth. She had not actually run a mine before, only leasing out rights. She seemed to want to prove the point that she could do more than just cashing in on roylaties. With setting workers up for life I'd be careful, too. What percentage is Australian?

      Generally speaking we ought to applaud the fact that we have a debate about inequality. There are others who are more concerned with their position in the world than with the well-being of their own people.

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  • graazt:

    29 Apr 2014 4:45:30pm

    I had understood that John Rawls contention is that there is no political solution other than breaking or limiting the institutionalised concentration of wealth that represents corporatism. Money IS political power - they are inseparable.

    Laws and regulation can help (eg following recent revelations at ICAC the proposal to publically fund political parties and ban political donations is getting some currency again). Revolutions have occassionally succeeded in restoring the interests of the citizenry over the elites; at least temporarily. But ultimately the existence of concentrations of wealth always distort the political system; and the larger they are the more they do so.

    Corporations and corporate think tanks are simply enemies of democracy in his view.

    Now people can trade off their suffrage for economic weal (and I agree that high growth helps lift more people out of poverty than low growth); but in a world of limited resources, and limited total aggregate demand, sustainable growth will become inevitable. As an existential matter.

    Unless we can kick off a big war or some other GDP-growth inducing event.

    A very interesting article! Thanks Mr Berg,

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    • Harquebus:

      30 Apr 2014 9:14:59am

      War is only good for those not participating. Unless it's nuclear of course. The U.S. came late to both world wars which, enabled it to expand its manufacturing base at the expense of the Europeans.

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  • J.t:

    29 Apr 2014 4:45:46pm

    Yeah, I did't think the book was revolutionary-it seemed to just state some obvious facts...

    In an economy where the rate of return on capital outstrips the rate of growth, inherited wealth will always grow faster than earned wealth...seems pretty straight forward.

    Wage growth won't always grow as quick as return on capital...cool story bro.

    Arguing that wealth will concentrate to levels incompatible with democracy seems to be the core of the argument, yet I always thought free people had a way of levelling the field....pitchforks and beheadings.

    If you are wealthy and don't share your wealth or reinvest in the community or make some efforts to pay your workers more...enjoy the guillotine.

    Not particularity a democratic outcome...but what we learn from history happens when a small class hordes the cashish.

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  • gug:

    29 Apr 2014 4:46:52pm

    Rich and poor in a capitalist system are two sides of the same coin. They are inextricably linked. In the case of the current environment, greater "focus" centres on the "rich" because that's the side of the coin that is being activity "weighted" through puppet politicians and political cronyism.

    What?s the argument for focusing on the poor? That they?re not ?consuming? enough now that they?re all stock to the gills with debt? That their non-existence political clout, is by virtue of its conspicuous absence, highlighting the bought and sold nature of our current political process? Or is it simply the same tired old story about them being too lazy and not working hard enough?

    In any circumstance which needs adjustment, you try and look at the entirety of the system and concentrate your effort on fixing the bit that?s broken, or what?s causing the problem. It?s not that poor that are driving political and economic policy?.they?ve not the money, the power, nor the knowledge or even the will to even bother. And even if there is a problem with slow growth, who?s at fault? Again, the poor don?t decide economic policy. The ?1%? (as much as using that term labels me a whining progressive) came out of the financial crisis with more money than ever, in fact, the stock market is doing great ? growing strong. It?s the ?real? (yet somehow lesser) economy that?s been burdened with the weight of the consequences of rescuing the rich from their own mess; and now it shambles alone in a listless drift toward what nobody knows, but everyone suspects, will be yet another economic disaster, likely just around the corner.

    Whatever??the entire system is stuffed. Blame the poor?Blame slow growth?Blame cookie monster?..whoever or whatever you blame, nothing will change.

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  • Maynard:

    29 Apr 2014 4:48:35pm

    Why are we so frightened of economic growth, for without it poverty & distress increase at an accelerating rate.

    Malthus pointed out centuries ago that linear growth is insufficient for increased consumption per capita.

    The small Australia envisaged by some will lead to massive deprivation, poverty and a diminished people led by a failed self-serving elite, responsible to no one. Environmental problems will worsen.

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    • ingenuous:

      29 Apr 2014 6:01:22pm

      Growth has so far required increased environmental impact. We already use more resources than the Earth can replenish. We are dooming ourselves via "growth".

      When a bottle full of bugs eats all the available food, they die. That's what we will do unless we cut growth and live within the planet's means.

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    • Grasshopper:

      29 Apr 2014 6:46:00pm

      "The small Australia envisaged by some will lead to massive deprivation, poverty and a diminished people led by a failed self-serving elite, responsible to no one. Environmental problems will worsen."

      As opposed to now, you mean?

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    • Harquebus:

      30 Apr 2014 9:06:37am

      Growth is poisoning us all and polluting our environment. A smaller Australia will give each a greater share of a shrinking pie.

      Growth is not linear, it is exponential. 7% GDP growth equates to a doubling of GDP every 10 years. Can China's GDP continue to double at this rate? They are consuming double what they did 10 years ago, 4 times what they consumed 20 years ago and in another 20 years, it will be 4 times what they consume today and 16 times what they consumed 20 years ago.

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  • Harry of Perth:

    29 Apr 2014 4:50:30pm

    Your absolutely right in saying the poor these days are much better off than their historical counter-parts. I've also been a firm believer that regardless of the political or economic system in place there will always be a form of soical hierarchy built on wealth and social status. Why is it so hard for people (particularly socialists) to accept this? Besides, the big story of the past 40 years has been western countries ability to borrow money and spend on otherwise unaffordable social programs (far from promoting inequality).

    PS: Economics is not a science. These economists carry on like they have bullet proof theorys. You cannot prove someone when you cannot account for all the variables in the system (ie human behaviour).

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    • jon:

      30 Apr 2014 9:38:26am

      Harry, this is an unusually sober and sensible comment from a modern conservative thinker. Thank you for your peaceful contribution and personal insight.

      My responses to your two major points are: a) yes, so far inequitable hierarchies have been universal to human societies. The outcomes have always been bloody and lamentable, and more so in proportion to the degree of inequity. My feeling is that we can and should use our wonderful minds and technology to move gradually away from this mode of existence. And b) I would say the grand 40-year story is of NECESSITY to borrow for social programs, more than ability. Our current capital elites have so far done a good job of ensuring they don't have to pay for the social programs that maintain the social stability they so rely on (I can't help but envisage a dyke holding back those grim seas of blood). We are currently learning that it's a harder trick to pull off than it seemed. Jon.

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  • Nobody:

    29 Apr 2014 4:51:41pm

    "There are lots of progressive reasons one might want to tax a population - for instance, social services or transfer payments. But simply because the government doesn't like people having lots of money seems like a very bad one."

    Which govt, anywhere in the world, doesn't cultivate or at very least tolerate a privileged = wealthy class? To make a sweeping generalisation, there have always been wealthy individuals and powerful institutions, and there always will be. Same is true for inequality.

    The issue I have with how best to organise the way any society works starts with encouraging as many individuals as possible to engage with the processes that determine the structure of their lives. That is the challenge that very few govts seem prepared to make a commitment to. Why undermine your own power? And as you point out, political power is entwined with wealth.

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    • Harquebus:

      30 Apr 2014 8:59:06am

      Because it has always been so doesn't mean that is always has to be so. Energy makes money and wealth generation will disappear along with out finite energy sources. Don't mention solar, it hasn't done it and can't do it.

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      • maddoga:

        30 Apr 2014 2:00:49pm

        Solar does it for me Harqy, it's just that you have a closed mind and although fossil fuels are burning now ,we will see a very different world when the oil magnates believe it is time to tap other sources of energy.

        Its called making money the easiest way possible,but as soon as one source becomes scarce they will find another ,it's just that they are not telling the public what is being worked on!

        Ask China why they want to buy farming land in Australia?

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  • Stephen S:

    29 Apr 2014 4:57:45pm

    Absolute rubbish! Slow growth will NOT harm everyday Joe Blow, but it will harm the Banks and Governments because they carry more debt then they can handle in a slow growth environment, meaning that wih faster growth comes inflation, and so their debt becomes less due to the inflation from high growth! That's why there is such a push in the EU for higher inflation , same for Japan. They will tell you some inflation is good for the economy, don't you believe it, it will rob you of a large amount of your hard earned money. Do the math!

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    • Harquebus:

      30 Apr 2014 8:54:49am

      That is right. Without growth, the massive global debt can not be repaid. Crude oil depletion is stifling growth. The massive debt that has been accumulated will never be repaid.

      Not that this bothers me. I am at the bottom of the economic heap and can not afford a loan even if I wanted one.

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  • JKB:

    29 Apr 2014 5:01:07pm

    From Amazon, read "From Cradle to Freedom"; much is contributed to this debate which has no answers, except to question the concept of democracy as a future safety barrier for civilisation.

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  • DT:

    29 Apr 2014 5:04:26pm

    "That doesn't sound terrifying, unless you are less able to enjoy your own earnings if others earn more"

    A fundamental understanding in behavioural economics is that it isn't money that makes you happy, it is, among other things, your relative income or wealth compared with those around you that contributes to how happy you are with what you have.

    I bet that Chris, and his lot at the IPA fully understand this. I also believe that they are fully aware of how counterintuitive it sounds, that the vast majority of the population are unaware of it, and would likely not believe it even if they had it explained to them. Yet they keep taking advantage of our collective ignorance.

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  • MD:

    29 Apr 2014 5:12:16pm

    If the richest 1% is accumulating a greater proportion of the available material wealth (ie the rate of return on investment of their existing assets) faster than the rate of growth, the difference must be being drawn from the remainder of the growth pool. That is, their higher rate of return detracts from everyone else's. Simple parasitism, actually.

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    • EEL:

      29 Apr 2014 10:31:20pm

      Individuals create wealth. Society does not. The wealth of society is simply an abstract aggregate of the wealth created by individuals. Hence, if the rich did not exist, you would not be a single cent wealthier (in fact you'd probably be poorer), because you would not thereby be any more productive and create any more wealth. Perhaps you would get a larger share of less, but you would not get any more in absolute terms. Economics is not, and has not been since the Industrial Revolution, a zero-sum game.

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      • MD:

        30 Apr 2014 1:33:49pm

        Society exists because the whole is greater than the sum of its parts, which accounts in part for economic growth. Without society, "wealth" does not exist, nor, consequently, the "wealthy". There's no natural infrastructure that supports the concept of material wealth: when you die, you lose it, when a stronger animal asserts itself, you lose it. Without the medium of relative value exchange, you can only own what you hold. Without society, your assets stop working when you stop using them personally. Your assertion that individuals would "probably be poorer" if the rich did not exist is startlingly hilarious, but unconvincing and unsupported. The missing rich would be the poorer, certainly, but the only thing that your claim illuminates is that the rich (and their admirers, like yourself) might think that they define "productivity".

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      • Ann:

        30 Apr 2014 2:39:37pm

        That's right. If a rich person and a poor person were both placed in the forest with no tools or human contact, the rich person would soon be rich again all on their own, with a nice mansion and TV, just from the fruits of their own labour, while the poor person would eat mud and cry bitter tears.

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  • blogged:

    29 Apr 2014 5:13:08pm

    "But [taxing the rich] simply because the government doesn't like people having lots of money seems like a very bad one."

    No this misses the point.

    We tax the rich more than the poor because the rich generally take more from society. Their wealth is built on the social infrastructure that is provided by the state. It's a user pays system in a way.

    When you start messing with that equilibrium by not taxing appropriately you end up with massive inequities and deteriorating infrastructure.

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  • Astroboy:

    29 Apr 2014 5:13:46pm

    The ICAC demonstrates that politicians are going all out to grab whatever they can. We can no longer afford rational debate on equality, economy and politics. To live in a mad world is madness in itself. Theories are fine for text book and class room discussions, but in the real world; we are all existing in chaos. Without descending into Liberal/ Labor political debate, this current government certainly feels that some are more equal than others. However, with Unions holding a gun to Labors head, the democratic principles simply disintegrates into process and policies forming the ivory tower when the Labor leaders are held hostage. Ultimately we are losing our sense of humanity. Politicians no longer draw boundaries between political issues and ethical/ humanity issues. The cutbacks affecting the lowest paid Australians, the detentions of asylum seekers, the destruction of nature via mining in the name of development and $$$; these events echo our march into the abyss of capitalist dream. The trickle down effect, that we are all middle class with some potential to stretch above only exists in the limbo of vanished possibilities. Let's all vote Green next time and see what happens! Just for the fun of it! (It won't be the end of the world, I promise)

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  • Steven:

    29 Apr 2014 5:17:55pm

    Chris, I largely agree with the tenor of your arguments. I don't mind how wealthy the richest people become, as long as they get there legally and pay their share of tax along the way without resorting to exotic avoidance techniques. I do care whether we as a society have safety nets for the poor. But we don't want to remove incentive for people to take care of them selves.

    I do think we are poor at identifying what poor means. Basing it on a percentage of average income is lazy and unhelpful as that does not measure whether people have accommodation, foof and clothing. Measuring poverty requires and assessment of whether basic needs are being met, not how much money somebody has. And none of that is affected by how rich the billionaires are as long as the billionaires are contributing to government revenue.

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  • sdrawkcaB:

    29 Apr 2014 5:18:01pm

    Sustainable systems involving populations follow the bell curve. The curve skews a bit in a cyclical manner as conditions naturally change but the average of the system is generally a fairly symmetrical curve.

    Distribution of wealth is so badly skewed it barely represents the curve.

    Without knowing anything about it, inductive reasoning determines this system cant continue for ever. It must fail at some point. Given the skew, the failure is likely to be catastrophic.

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  • virgil:

    29 Apr 2014 5:27:43pm

    Well I guess we will all be equal Chris when our obsession with unsustainable economic growth drives the world over a cliff.

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  • rockpicker:

    29 Apr 2014 5:29:20pm

    Open your eyes man. Inherited wealth is behind the liberals and they are as crooked as the rest. if you keep the lower class separate enough, without hope long enough they will rise against you. Forget your political gods in the US, we want none of it here. Look at the countries with significant welfare, good health and education. That is the ones who tax wisely and expect those who benefit most from the country to contribute most. They are the ones with the highest well being and happiness scores. You and your IPA have no idea.

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  • Jimbo:

    29 Apr 2014 5:48:08pm


    The problem cannot be remedied by increasing growth. The argument in the book is that capitalism creates conditions such that r > g is always true (except in exceptional times, e.g. after a large destruction). Reasons are quite obvious - it is the rich that write the rules, so, of course, they are going write ones that suit them better.

    Just look at the financial system, for instance. It is essentially pyramid scheme, created by the rich. The more you try to reach the top echelons of the pyramid, the more money you are giving away to the top players. And there is never a downside for the rich in the new capitalism, only upside.

    As to poor being better off, sure. The rich found that it is better to have more consumers, because it gets them even more rich. There isn't much else to it. People are also more placid and less prone to revolutions when they can watch TV, drive their car, play with their smartphone etc.

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  • Harquebus:

    29 Apr 2014 5:58:17pm

    Economic growth is the last thing that we should be chasing. The economy is a surplus energy equation and we are running short on cheap surplus energy.

    The growth deadheads have no understanding of the exponential function and fail to realise that we live in a finite world. Population reduction is a must if we are to avoid terrible things. Chris Berg and his fellows will soon lose their reputations as these realities which, are already dragging on Western economies, become apparent.

    Our oceans and environment are in terminal decline.

    In the inspired words of the late Gaylord Nelson, senator from Wisconsin and founder of Earth Day, "The economy is a wholly owned subsidiary of the environment, not the other way around."

    It's time for population degrowth. It is the only way save our environment and improve living standards and quality of life.

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  • Val:

    29 Apr 2014 5:58:27pm

    I don't know about the situation in Australia, but here in England we have a prime example of how an emphasis solely on growth (as opposed to equality, or a combination of both) only benefits those at the top end of the income distribution.

    London is in the middle of a house-price boom. In the past year, prices have increased by over 9%. The average London home now costs ?410,000 - 2.5 times the average over the whole country. The average London income is ?26,500 - so an average house costs a two-income family eight times their combined annual salary. Most banks wouldn't even look at that sort of mortgage request.

    The boom has at least partly resulted from wealthy overseas buyers using London as a tax haven. Non-domiciled property owners do not pay stamp duty, and get a rebate on their council tax. Foreign owners also frequently leave their properties empty, meaning that local economies suffer, and the stock of new housing is not as great as it looks on paper.

    In addition, to appeal to the wealthy, much of the new property development occurrring in London is at the higher (as opposed to the affordable) end of the market. Hence people working in London are increasingly unable to afford to live in London - the result is long commuting distances with high commuting costs (London has the highest rail fares in Europe - typically between ?5-7 per mile travelled), and a poorer work-life balance.

    In the past few years, some people's commuting costs have increase to the point where it is actually no longer cost-effective for them to go to work in the city. These include teachers and emergency services workers - workers whose low salaries preclude living near their inner city jobs, and who do not have the option of working from home.

    So while the average Londoner becomes less and less a Londoner and more and more a bedroom community dweller, spending hours a day on trains instead of with their families, and paying thousands of pounds a year just to go to work, London's wealthy residents and non-domiciled property investors continue to laugh all the way to the bank.

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  • Erik:

    29 Apr 2014 6:02:38pm

    Being "viscerally opposed to inequality" is merely nailing one's communist politics to the mast, nothing more.

    OK, some might be envious of the performance (and medal winning) of olympians, while others envy those who have a higher income. The balance between recognising contribution (whether taking productive business risk, creating new intellectual property, or similar), and redistribution of some of that to underperformers because of need, is a function of our democracy which is sometimes labelled "pork barrelling", sometimes "welfare", sometimes "we godda right to a good standard of living, even if someone else has to pay for it." Granted, that does not excuse the obscene salaries of CEOs of large corporations, when they are _not_ performance based. Income equality is perfectly fine so long as it is reasonably proportionate to _measurable_ value to the enterprise, and a modest part is taxed for the common good and those who can't support themselves.

    But forget increased growth. That era is past. The resources of a single planet are insufficient to maintain the current standard of living for 80 million more greedy consumers every year, while feeding the conveyor to the

    7,200,000,000 already consuming wastefully. In the coming decades there will be growth in reconstruction following fires, floods, and hurricanes, but also a gradual cessation of population growth, if we are to avoid population stabilisation by increasing the death rate by 80M p.a. Choice is unavoidable, because inaction is also a choice - with the most dramatic consequences.

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  • Ataraxia:

    29 Apr 2014 6:03:29pm

    Mr Berg seems to miss the point. Everything is not gauged in economic terms.

    An inherent sense of justice is violated when there are great disparities in the perceived worth of individuals in a society.

    The loosening of social cohesion and a sense of community puts at risk the very system that sustains rich and poor alike.

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    • Jimmy Necktie:

      29 Apr 2014 7:13:47pm

      "An inherent sense of justice is violated when there are great disparities in the perceived worth of individuals in a society"

      I don't judge the worth of an individual by how much money they have, do you? I do judge that worth based on other factors, which would indicate that worth is subjective and so can't be equal in any quantifiable way.

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      • Ataraxia:

        29 Apr 2014 7:52:25pm

        I don't like to resort to semantics but the main dictionary meaning of the word 'worth' is associated with monetary value. I do agree that people SHOULD not be judged on that basis - but try getting a housing loan or joining an exclusive golf club without having your value assessed. When inequality becomes manifest, social tension rises and even a brief excursion into history reveals that when a threshold of dissatisfaction is crossed revolution becomes inevitable.

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  • Daveb:

    29 Apr 2014 6:04:14pm

    Why do we have to see our future as a battle between Greed and Need?

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  • PKD1:

    29 Apr 2014 6:11:19pm

    Inherited wealth allows people to undertake higher risk investments, which usually results in higher rates of return. Variations in overall economic growth would not, other things being equal, change this outcome so there is no surety targeting specified levels of growth would achieve greater income and wealth equality.

    The key is to have easy access to capital both financial and real, a well educated business sector, support for innovation in products and services and a social welfare/tax system that underwrites a good level of social and educational services. The USA ranks well in all of these criteria except the last.

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    • Harquebus:

      30 Apr 2014 8:34:59am

      What we really need is cheap energy. Unfortunately, that is now gone.

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  • ME:

    29 Apr 2014 6:22:48pm

    A society based on endless growth is unsustainable

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  • Mitor the Bold:

    29 Apr 2014 6:23:36pm

    "Piketty's book - and so much of the inequality debate more generally - seems to suggest that the core problem with inequality isn't that lots of people are poor, but that a few people are rich."

    It's not so much that "a few people are rich" as it is that when a few people hoard so many scarce resources for their personal benefit it can only be at the expense of everyone else. This is specially glaring in times of global austerity such as now. Resources are finite - it is a zero-sum game

    If I had managed through deft manipulation of the prevailing trading system to stock a barn full of food in a village of starving people, then the mayor of that village might well consider it legitimate to force me to give up some of the food for distribution to his constituents. Then he might demand that the system that led to this disparity be examined for in-built bias.

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    • MD:

      29 Apr 2014 7:23:20pm

      Berg's contention is that you're not really starving, that that absolves the egregiously acquisitive of everything, and that everything else is the politics of envy.

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  • The Jones Crusher:

    29 Apr 2014 6:44:26pm

    I don't suppose Chris Berg is trying to tell us that with an unprecedented run of economic growth in Australia that we have no inequality or disadvantage as a result. Oh well..

    Next theory, please?

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  • Gordon:

    29 Apr 2014 6:57:25pm

    Chris, mate, at a certain level of inequality someone will get out the tumbrels & the knitting needles, and that is always bad news.

    Knowing that this is the turkeys voting for Christmas might be intellectually satisfying but it's not the outcome I'd choose. You?

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  • ltfc1:

    29 Apr 2014 7:06:26pm

    As someone who is clearly located in the very middle of the spectrum between well off and not so well off I reckon having money is better than not having money. So how much money should I be allowed to have before I'm called greedy, wealthy or super rich? Well, in our capitalistic world as much as I can make seems the norm and what's wrong with that situation? Nothing as long as you give back to those who don't have any. So what about all those people who contribute nothing to the economy or their own lives but rely instead on welfare? Do they have a right to question others who have been successful? If you drink, smoke and party hard through your younger days while someone else works diligently and saves hard to achieve their personal goals do you really have the right to complain. If we look at the good work done by many wealthy people excluding those involved in crime we find more examples of wealth benefits than wealth negatives. It is always in the interest of people with money to have a bubbling economy rather than a flat one and considering their high debt levels their loses can be very high. This can damage those who rely most of all on the expenditure of their money so the circle of win/lose/win/lose continues. In my opinion the only way the world we live in can be truly free of inequality is to remove the one thing that causes that situation to exist and that is find another value for humanity other than the Dollar! Money and money alone is responsible for the inequality that surrounds us all and our hunger for it leads to the destruction of lives, land, wildlife, property, power and control. If you have money you have the power and control to change the environment around you and that can be good or bad.

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  • Treetop:

    29 Apr 2014 7:18:08pm

    What happened in 2007 shows that an unregulated capitalist economy doesn't work for the majority of people but a capitalist economy can work which is strongly regulated .

    An economy where 1% of the population holds 99% of the wealth can occur if an economy becomes unregulated .

    For an economy to be successful it needs people to be employed or self employed and to have confidence to spend .

    Most people employed in a successful economy are employed in businesses that provide non-essential services or products and the majority of businesses make their profits selling low price products in high volumes to the majority of people and not to a select few of the population who are rich .

    For an economy to grow , it needs people to spend after they have covered the basics of life like housing , electricity , petrol , basic groceries etc .

    Tony Abbott and Joe Hockey should realize that reducing pensions is bad for the economy .

    In Australia housing is too expensive to buy and rent and that is a reason why retail sales are flat at the moment because too much money is going back into the banking industry on home repayments and not being spent on other areas of the economy .

    For $40,000 in the USA , you can buy a beautiful home on a very large allotment , the same home in Australia could cost millions .

    Government revenue in Australia is down because too much money leaves the country when people buy products from overseas such as internet listed goods being purchased overseas or when Australian workers are replaced with overseas workers who do the same work overseas .

    Workers who work in Australia usually spend their income or part of their income in Australia , workers doing Australian work overseas spend overseas and the Australian economy is the loser , also when businesses are located in Australia , the flow- on- affect in the economy can be large as the businesses and their employees spend their income locally within the Australian economy .

    When Australia had large manufacturing factories like textile factories , the workers spent huge amounts locally including buying their lunches locally .

    The main problem with the Australian economy is that government revenue is down .

    Countries like Greece who reduced government spending have found that the economy only got worse because government spending stimulates an economy by a flow- on- affect and also provides lots of GST and tax revenue to the Australian government .

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  • New World:

    29 Apr 2014 7:36:45pm

    People in Business charge the highest amount they can for goods, to get the biggest profit.

    High income earners can pay high prices, so the prices become what a high income earner can pay. This leaves low income earners not being able to get much for their low pay. So this points to high inequality in earnings being a bad thing.

    Regarding Low Growth. There is a call to stabilise world population, when this becomes reality, then growth will become low, so low growth is a certainty for the future.

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    • PW:

      29 Apr 2014 9:35:54pm

      It's true that vendors charge the highest price the market can bear, but there is always the proviso that they wish to sell sufficient of their goods or service to make money.

      The critical words are "biggest profit". In most cases, the biggest profit is achieved by selling greater numbers of units, particularly where you are competing with others selling the same thing.

      It is genuine competition that brings prices down.

      The exception is when you sell a truly exclusive product, like Rolls Royce cars, or a product that is scarce, like bananas after a cyclone.

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  • Conrad:

    29 Apr 2014 7:43:49pm

    Pickney also points out that economic growth is largely driven by population growth. Which is also exactly how Australia has been 'growing' in recent years. Our per capita GDP has flatlined, but by importing 200,000 people pa we get 2% GDP growth. Individually we are getting worse off...but the rentier class who owns the r is laughing all the way to the beach. And in the meantime we also become a more unequal crowded place.

    You want more of that? We would be a lot better off without such false growth.

    It is possible to grow sustainably, with new tech, better ways of organising ourselves etc, but all that is harder and takes actual investment in r&d and social and infrastructure capital etc compared to just importing warm bodies, so the rentier class wont do it unless forced.

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    • me:

      29 Apr 2014 9:54:49pm

      I can?t think of anything that has improved since the 1960?s.

      Not a single thing.

      In the 1960?s a family could be run on a one person income, and a home could be readily bought and the mother and father retire at 65 or less.

      Meanwhile there was some environment left for people to enjoy and I believe people were socially better off as well.

      Not one single aspect of life has improved since that time.

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    • Treetop:

      29 Apr 2014 10:16:44pm

      If the government helped to increase the supply of housing and helped to reduce the prices of electricity and petrol people would have more to spread throughout the economy instead of spending the largest proportion of their income on basics .

      To increase growth you don't need a population increases ,you only need the same amount of people to spend more in areas that helps to expand the economy .

      Too much money is going back into the banks each week because housing in general is too expensive in Australia and other parts of the economy are suffering and retail sales are greatly affected when people don't spend because the bulk of their income is being spent covering just the basics to live .

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      • me:

        30 Apr 2014 7:55:04am

        I would think there is the necessity to decrease the population to increase economic growth.

        Otherwise we will run out of resources.

        Growth in GDP is basically extraction of natural resources and increasing growth means using up those resources at a faster rate.

        We are at the situation of peak population in Australia or may have passed that peak already.

        An example is with fish stocks. Every fish stock is at maximum fishing and anymore fishing will cause fish stock to decline.

        So if we increase fishing to feed an increasing population we will increase GDP growth but we will eventually exterminate fish species.

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  • Citizenjane:

    29 Apr 2014 8:11:04pm

    I immediately think of those poor Walmart staff in the US when there were reportings last year of food being donated to staff by customers.

    This is another good example that demonstrates Bergs notion to be a fallacy. The Walmart owners already have a huge slice of that nations wealth and yet they continue to bleed their staff of any security, financial stability, and opportunities that come with that to further themselves.

    The owners of that organisation continue to this day to rort every tax and legal loophole to ensure that their piece of the pie gets bigger. They have no social agenda.

    But According to Bergs philosophy, we should be encouraging the likes of the 'wal marts' because they create jobs that supposedly allow the distribution of wealth to flow in to lower echelons. Clearly in this case that doesn't happen.

    This is a significant point Chris Berg continues to miss. Without appropriate laws in place to prevent this type of industrial anarchy, many employers will lose control of any sense of fairness and social equality. The greed gene is quite dominate.

    This country will go down the same path unless we resist the temptation to hand all power to corporations and govts that support them

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  • inmyuniverse:

    29 Apr 2014 8:40:23pm

    can we do these both things at the same time?

    One is to prohibit super rich accumulating wealth at faster rate.

    The other is making an economic growth and progress even slightly. Can't we achieve these things together?

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    • Treetop:

      30 Apr 2014 2:09:37pm

      Accumulating wealth and going nothing with it does nothing for the economy , the economy would do better if the majority had more to spend on the non-essentials of living instead of a small section being super rich who spend the most in the economy because most sellers of products find it better to sell in large volumes at a fairly low prices and to get repeat business instead of selling in very small quantities at a very high price .

      People who accumulate wealth and do nothing with their wealth are like squirrels who spend most of their entire life collecting chestnuts then hiding them and then forgetting to use them .

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  • Jerry:

    29 Apr 2014 8:57:33pm

    Chris your interpretation of Picketty's formula is in error. r>g means that the rate of transfer to the rich is faster than the growth in the economy. This describes a situation that guaranties a zero or negative situation for the poor regardless of the rate of growth.

    If r=g then inequality will still increase

    Inequality is only reduced when r

    The rate at which inequality is reduced or increased is a function of the ratio of the application of benefit to the rich and the poor. If the return on investment is higher than the return to the poor then inequality increases. If the reverse is true the inequality is reduced.

    Inequality can therefore be reduced on a no growth situation if the returns favour the poor.

    A higher growth rate provides a greater opportunity for reducing historical inequality if and only if p ( the return to the poor) is greater than r.

    Given Plato's assessment that inequality produces war and conflict, inequality should be seen as relevant to the rate of return. The costs if inequality in your argument, Chris, is treated as an externality which is also incorrect.

    Sorry your article has poor logic and poor economics as its base.


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  • Toto:

    29 Apr 2014 9:19:07pm

    Does it show inequality is the reason of slow growth? I partly agree with it.

    Because the inequality shows that the gap exists in the society and in the situation now, the gap is more and more clear. Some survey shows there is no middle class in some countries. So if just the poor and the rich make up one country, the consumption in it is not positive. Because the demand of the rich is limited and no middle class, the poor cannot buy so many things like middle class, which makes sence.

    But for the government the slow growth and inequality should be paid equal attention. Because these two can make a cycle. If it tures better, the economy of nation will become healthy and good and vice versa.

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    • Harquebus:

      30 Apr 2014 8:11:36am

      Economies depend on energy which, does not get factored in economic equations.

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  • me:

    29 Apr 2014 9:26:22pm

    There are claims that Australia has achieved growth in GDP, but the revenue to the treasury department is actually falling.

    Therefore increasing GDP does not equate to increasing profits.

    Meanwhile the present government is suggesting we need to increase the retirement age and increase taxes to counteract growing debt.

    So how can there be decreasing profits and increasing debt but economic growth at the same time?

    In the minds of economist there can be such a thing.

    These are serious matters, and time for economists to state why everyone should continue to call them economists, and not something else.

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    • Harquebus:

      30 Apr 2014 7:32:13am

      Economists like to think that economics is science. It is not. If it was, they would factor externalities like the environment and resource depletion. They can't do that. It would destroy their ever so precious economic models.

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  • Anne T:

    29 Apr 2014 9:36:33pm

    Oh yawn. Why do you write in such a tiresome way when on radio you can be engaging and a tad more open-minded. All the criticisms that you level at Piketty can be levelled at your work.

    The most staggering is that you (of all people) have the cheek to say "It's remarkable how many hidden assumptions and unexamined ideological preferences surround the entire inequality debate."

    You may want to have a long hard look in the mirror. With all due respect, this article was written based on "hidden assumptions" and "unexamined ideological preferences."

    I would enjoin you to actually engage responsibly in public discussions rather than engage in your fervent free-market proselytising.

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  • tim Thornton:

    29 Apr 2014 9:58:59pm

    Utterly predictable perspective from the IPA. Its a pity that this corporate funded nonsense factory gets so many media coverage for its strange views. Wilkerson and Pickett's 'The Spirit Level: Why More Equal Societies Almost Always Do Better' presents compelling statistical evidence that inequality is the central scourge of our age. This book is at least equal to Piketty's in its significance. You can see a good summary via Pickett's TED talk https://www.youtube.com/watch?v=AFOEe6M2VT4 The type of efficiency-equity trade off implied in Berg's article could not be more wrong.

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    • Ann:

      30 Apr 2014 2:50:23pm

      Well we just have to sit tight and expect more of this nonsense in the ABC's efforts to prove they can give "equal coverage". Although I note they aren't giving equal coverage to the people who think alien lizards live under major cities yet, so they are still being very exclusionary!

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  • hazel motes:

    29 Apr 2014 10:13:13pm

    Inequality, the new buzzword, that's just part of propaganda to force wealth redistrubtion on all of us who actually contribute to society. 'Social Justice' is its traveling companion.

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    • Treetop:

      30 Apr 2014 2:22:10pm

      I have never meet anyone who is rich and is self made .

      Anyone uses the structures that are provided in a society to get their incomes but some people are selfish because they want to take everything from what a society provides but never want to give anything back in return .

      Money would not be worth the paper it is written on , unless a society had banking and finance laws .

      In the long term , inequality is negative for everyone and history shows this by looking at past civilizations that have crumbled by greed .

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  • Wilc:

    29 Apr 2014 10:20:31pm

    I suppose one can't expect anything different from the right wing of Politics , but I must admit this is a different approach to Piketty's book...We should fear slow growth instead of inequality....

    I was amused at his last sentence " seems to suggest that the core problem with inequality isn't that lots of people are poor, but that a few people are rich." I would suggest that the real problem with inequality is that TOO few people are rich and that capitalism has failed to distribute wealth evenly or fairly concentrating in in the hands of too few a people in society .

    Capitalism is failing just as communism did, because it's concentrates wealth and power within too few hands and because in my opinion it relies on unlimited resources that this planet doesn't have.

    We need a blend of free enterprise and high regulation with mechanisms in place to ensure that wealth is distributed across all people not just a few.

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  • PAul quirk:

    29 Apr 2014 10:41:35pm

    Seems to me like the author is trying to support "Reagonomics" and the trickle down effect. I thought that theory was debunked years ago!!!!!

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  • PAul quirk:

    29 Apr 2014 10:41:58pm

    Seems to me like the author is trying to support "Reagonomics" and the trickle down effect. I thought that theory was debunked years ago!!!!!

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    • Harquebus:

      30 Apr 2014 7:23:41am

      It trickles up.

      Debunk is to prove that something is not bunkum which, the trickle down effect is. The word today is being misused.

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  • Nedkel:

    29 Apr 2014 10:44:53pm

    A nation built on the concept of constantly chasing increased growth is crafting its own coffin. If Australia has not learned from the Howard years, Abbott will put us all in the ground in the fairly short term.

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    • Harquebus:

      30 Apr 2014 7:20:10am

      If Obama and Putin don't do it first.

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      • Nedkel:

        30 Apr 2014 7:54:58am

        "If Australia has not learned from the Howard years, Abbott will put us all in the ground in the fairly short term." said Nedkel

        "If Obama and Putin don't do it first." said Harquebus

        And Abbott will join with Obama to ensure Obama and Putin succeed, with Abbott not having to show his new :fighter" planes are outperformed by the Russian jets..

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  • Steve_C:

    29 Apr 2014 11:17:23pm

    "...the core problem with inequality isn't that lots of people are poor, but that a few people are rich."

    Hey Chris!! I felt compelled to add the adjective that gives your comment the more appropriate impact it deserves.

    That adjective - in both noun cases, would be "obscenely".

    You see it's not just identifying some folks as "rich" that's at issue - it's the obscene level of their 'richness' compared to the obscene level of poverty of the far greater majority of the "poor".

    One of the most convenient frauds of those who feel clever in their use of the English language, is the (deliberate or subconscious? Hmmm...) omission of terms/words that would indicate the true intention of the person using the words.

    Mind you, it's a nice try at making it seem that the 'obscene' rich are actually just "rich"; like so many Aussie aspirants like to think of themselves.

    What you've crafted Chris, is merely a thinly veiled justification of the Conservative mantra that's been the battle cry of the LNP since it's inception - namely, "Yeah; it's not bad to be rich!" "How dare those slackers who bludge of the rest of us who work hard have a go at hard workers who deserve the rewards for their effort and/or risk taking?!!"

    It pays not to add that qualifying adjective "obscene" in there because it changes everything; doesn't it?!!

    So why leave it out when it's clear you know only too well that the issue is the "obscenely" rich? Brown nosing?

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    • Polly Wolly Doodle:

      30 Apr 2014 9:33:46am

      Agree Steve C,

      Dramatic social $$mobility has always been the exception rather than the rule. But it doesn't hurt to dream of equality, however impossible.

      In any capitalist society most people are destined to be part of the middle and working class, and the IPA, Chris, Abbott and others, need to invest their intellect into seeing public policy that is focused on raising the standard of living of the middle and working class. And focus less on the chances of everyone getting equally rich. Over time we need to see the standard of living raising sharply.

      Under Abbott, our economy is destined to slow down and average workers' share of the pie will shrink. They need to either get wages growing or man up and address the things that scare politicians, like redistribution and taxes.

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      • Steve_C:

        30 Apr 2014 11:46:39am

        "Under Abbott, our economy is destined to slow down and average workers' share of the pie will shrink. They need to either get wages growing or man up and address the things that scare politicians, like redistribution and taxes."

        I agree wholeheartedly... though I do also believe that it wouldn't matter which political party or leader was in power.

        The fact of the matter is, that the uber-rich are on the verge of owning the pie lock stock and barrel; and just like the super greedy kid who once they've beaten off any other kids who might like to play with some toys or have a piece of the party cake, jealously guards their prize from anybody who might have the temerity to expect them to share by enlisting accomplices with the promise of a crumb or two to enforce their dictatorship, they've enlisted their own accomplices amongst our political parties who'll ensure that no matter who is elected; avarice (in it's guise of something to be reached for because of it's benefits to the avaricious) will always top the interests of the majority.

        That in itself indicates just how likely any wage growth for the majority of the Nation's working population or "manning up" to tackle redistribution and taxes will be!! A snowflake would stand a better chance in Hell!!!

        Perhaps it's not surprising, that our greatest 'statesmen' were generated at a time when the wealth gap was nowhere near as wide as it is now (or has been for the last 2-3 decades). They weren't as easy to tempt, nor as tinfoil like in their honour or self-respect.

        The bunch of pollies we have now - at all levels deserve about as much respect; in my humble opinion, as seriously aromatic navel lint.

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  • Not Such a Golden Oldie:

    29 Apr 2014 11:57:36pm

    I have recently purchased Thomas Piketty's book "Capital in the 21st Century and I'm finding it very interesting. He has brought a wealth of research to his findings and also is very clear as to when he is dealing with empirical evidence and when there is an element of speculation in his theories.

    I don't have much respect for the economics profession, hardly any of them forecast the GFC or similar economic crashes and there is a strong core of "magical thinking" involved in their theories (even the semi god Adam Smith), so it is refreshing to read an economist who is taking three centuries of economic data and analysing it in a great deal of depth.. I haven't finished the book as yet, much less digested it, however I welcome his contribution.

    In my reading to date of the book Piketty has not analysed the quality of investment, but perhaps that will come. However I think there is a lack of analysis in this area in general. It is well known that investment in innovation is beneficial to society as a whole, but investment in "rentier" investments can be quite detrimental to society as a whole. I would like to see a distinction made between these two classifications of investment, because the bland assumption that all investment leads to increased wealth of the whole population is likely to be flawed.

    If we had more information about the effects of both types of investment of capital, I believe we would be much better informed as a society and better able to create mechanisms to reward innovation and perhaps tax "rentier" income (as an example) at a different rate, as being insignificant in bettering society as a whole.

    It is mere sloganizing to talk of "the politics of envy", I'm sure there are envious people who resent wealth of any kind at all, but I think it is justified to examine whether the wealth of the wealthy is merely benefitting just the wealthy or whether there is a benefit to the whole of society.

    There seems to be an awful lot of unsubstantiated claims about the so-called trickle down effect. Perhaps more qualitative research would illuminate this area and provide a better guide to the whole of society. I for one have no problem with rewarding those who benefit society as a whole, but have doubts about the benefits of (particularly) inherited wealth, which is invested in "rentier" capitalist projects.

    We seem to be making great strides in such things as medical advances and technologies, which bring benefits to society, but I believe that the economics profession is lagging behind severely and much of it's output is little better than that of the interpreters of chicken entrails of bygone days.

    I still see the same old economics "experts" on TV, spouting the same old message that they did before the GFC, who did not forecast the GFC. By the way, did Chris Berg forecast the GFC?

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    • Harquebus:

      30 Apr 2014 7:14:32am

      The GFC was caused by peaking crude oil production. Peak oil was 2005. The massive increase in the price of oil put pressure on low incomes which resulted in housing credit defaults.

      Currently, crude oil production is flat if you include condensates and so are western economies. Economists think that high prices will provide more oil. Baloney. Extraction rates are slowing and economies are decaying. This will continue until journalists who, are mostly stupid, realise our situation. Too bad it's already too late.

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    • Maynard:

      30 Apr 2014 8:59:57am

      NSAGO most economists who have some reflective ability do indeed see the limits to their profession. Primarily the foundations of economics are in philosophy and ethics; we must also remember that it is a social science and that the basis of financial economics is provably wrong, despite the fact that all our universities teach old school rational market theories from Chicago.

      Also the Nobel prize for economics has been given regularly for opposing economic theories.

      Incidentally the ETS is based on this rational market theory.

      As Keynes said we are all driven by some long dead economic philosopher. He never trained in the discipline and made & lost a lot of money speculating in financial markets.

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    • Mike (the other one):

      30 Apr 2014 1:14:16pm

      Perhaps the economists are too busy dealing with and listening to bankers, business people and politicians who themselves are too busy rearranging piles of money, making deals and politicking to put aside the time to see what's really going on at more a fundamental level. No real excuse I know but how many times have we heard the line; 'No hard feelings mate, it was just business'.

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  • aussieinjapan:

    30 Apr 2014 1:03:22am

    The largest impetus to growth during the 20th and 21st centuries has been income equality. It has been shown that inequality holds back growth.

    Berg's argument is antiquated. It comes from the 19th century when inequality saw the emergence of social activists who understood that such a society which relied on the ideal of one dollar one vote was wrong.

    We are going back down the same path. There is nothing wrong with being rich but when all one does is to contribute capital to another's ideas (who cannot afford to get funding from the banks) and get most of the rewards that is not fair.

    There is also nothing fair with having preferential treatment to politicians because you have deeper pockets of cash than another person.

    There is nothing fair when individuals have different levels of access to the law. A poor person cannot afford the costs so his rights are run rough shot.

    I fear Berg's arguments.

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  • Mike (the other one):

    30 Apr 2014 1:30:35am

    There's that word again, growth, a word always used by economists to measure the status of an economy but they never really delineate between two very different types of growth that can affect an economy, that is economic growth and population growth. They talk about the two as though they are one and the same thing and that you can't have one without the other. You can of course.

    Before going any further in that direction have a think about economic growth. Real economic growth, the sort of growth that improves our lives and takes us forward is a relatively slow process. There is nothing to fear in that and it can only happen after we have taken care of the daily business of maintaining the status quo which may even slow things down a bit more depending on circumstances.

    The real fear lies in the motivations of that 10% and the sort of addictions they are feeding. Unquestionably an addiction to power and money and the high they get from it. It's pure and it's simple, they're always looking for the next hit and like any drug addict they'll tell you anything to get what they want. They will also seduce you into believing how gratifying their addiction is.

    In order to feed an addiction you need a steady, reliable supply of your chosen drug. So what's guaranteed to maintain a steady supply of money? It's not the real economic growth that takes us forward in a sustainable manner - too slow and unreliable for the addict. That leaves population growth as being the ideal mechanism to feed the habit by way of constant and consistent profits drawn off endless growth. But any sane thinking person realises we can't have endless growth on a finite planet. Regrettably we are in the hands of addicts that purposely don't delineate between the types of growth because it helps to obfuscate their addiction by presenting growth in general as a positive for us all - they're always thinking about their next fix.

    So I would say to Mr. Berg that we should not fear slow growth but fear the unfettered, out of control addiction that ultimately causes gross inequality.

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    • Not Such a Golden Oldie:

      30 Apr 2014 10:43:57am

      That's another thing I like about Pikkerty's book, he clearly differentiates between growth through population growth and growth through productivity. He shows that the rate of productivity growth has been very steady through the last three centuries. Of course there have been growth spurts in different nations and at different times, but it still averages out.

      Net of population increase, in the 20th century the period 1914-1945 was a period of low growth, marked by a huge destruction of wealth, followed by a catch up era from 1945-1975. Averaging the two periods shows productivity growth in line with long term averages. The era since the 1970's (net of population growth) is also bang on long term average productivity growth.

      What is significant about this is that in the period 1914-1975 productivity growth (net of population increases) showed the same average growth over the whole period as the long term average over the previous two centuries. During this period, the sharing of wealth was much more equalised. The period since then has resulted in a marked increase in inequality of wealth, but still producing the same long term average of productivity growth.

      I think he demonstrates that it is unnecessary to have inequality of wealth to produce productivity growth - it is a fairy story.

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  • jusme:

    30 Apr 2014 6:02:54am

    Too much of anything is unhealthy and I think this applies to inequality too. Slow growth is only a problem because it must at least match population growth or people will suffer. If population was stable, we could have periods of zero growth and it wouldn't matter, the same pie keeps getting shared. I think it's only natural that there are periods of zero of very low growth, but because the accepted practise is endless population growth, these natural periods become disastrous.

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  • YeahRight:

    30 Apr 2014 7:09:04am

    "there is no suggestion that the mere existence of the super-rich creates poverty." - it perpetuates poverty via control of international and domestic policy.

    "Where, in the past, only the rich could afford home heating, food refrigeration, personal transport, and to outsource chores like clothes washing, now those luxuries are shared by rich and poor alike."

    - aaahahaha Chris Berg to the rescue of the 1% again! What rubbish! How can someone on newstart afford to PAY someone to do their laundry? How deluded are you mate?

    "And (here's a bonus!) a focus on growth above all else would directly help the poor."

    - Never elaborated upon just a sweeping statement; how odd from the right. Growth effects poor and rich alike so the differences between poor and rich are maintained. Except for the fact that proportionally, as Piketty suggests, the rich grow wealth from this economic growth at a larger rate.

    "(A subsidiary concern he has is that high net wealth individuals dominate western culture. Maybe. But surely this applies better to the top 10 per cent rather than the inherited 1 per cent he focuses on.)"

    - Actually it is those that inherit money AND power at the top 1%! Derp.

    "Arnold Kling makes a really important economic point - Piketty's nightmare of mass capital accumulation would actually boost the wages of the rest of us. That doesn't sound terrifying, unless you are less able to enjoy your own earnings if others earn more."

    - oh yes of course Chris! Trickle down economics has always worked, right? And when the growth of our wealth and wages grow more slowly than that of the rich, the whole damned point of his book, this inflation doesn't benefit us in the way you suggest as prices and costs inflate along with it; often at a faster pace.

    "The philosopher John Rawls more concretely outlined what he saw was the ability of financial power to become social and political power. Yet if it is political power we are concerned with, then why not tackle political power directly? In New South Wales the ICAC has shown that wealth is neither a necessary nor sufficient condition to wield corrupt influence. It wasn't inherited riches that gave us Eddie Obeid."

    - Pray tell how Obeid (could have used a more up to date O'Farrell but no bias here...) had power? Power is Rupert Murdoch buying an election via his media influence. Power is Clive Palmer spending his way to an effective campaign and now retaining the balance in the senate. Obeid had nothing of the sort.

    "Yet in context it makes sense. Piketty's book - and so much of the inequality debate more generally - seems to suggest that the core problem with inequality isn't that lots of people are poor, but that a few people are rich."

    - This is a gross misinterpretation. Obviously the problem with so many poor is the issue wit

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  • Jay Somasundaram:

    30 Apr 2014 7:36:10am

    Rubbish. Piketty is not against growth. What he is saying is that when return on capital is greater than growth, it needs to come from either return on labour or rapid innovation.

    What he is disputing is the trickle down theory of capitalism: that when the super wealth get super-super-rich, the poor get a bit richer. What he is saying is that in periods of low growth, the super-rich still grab their returns, so the poor end up getting poorer.

    And the super-rich are making profits in Australia, and paying very little taxes. And neither Abbott nor Hockey are telling us what they are doing about it.

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  • Judas:

    30 Apr 2014 7:49:09am

    Inequality is born of too many people (large populations) with too many being available for abuse/slavery.

    Goods made too cheaply by slaves - western manufacturing cannot compete.

    Too many multi-nationals/locals making Billions $'s and CEO's with 10 - 20 M salaries is fueling inequality i.e. greed.

    Pharmaceutical drug companies keeping the world poor and sick as CURE is not the aim, but should be. More exploration on supplements/complimentary supplements at cheaper cost should be explored by government bodies.

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  • Scotty A:

    30 Apr 2014 8:09:13am

    I think most lay-people with an interest in this field sense the time is ripe for a new type of economics. This is why economists like Ha-Joon Chang are so popular and (to me) interesting. Okay, so lets focus on the poor. Lets focus on the failures of micro-finance. Lets focus on the bloated salaries of executives that have grown at rates well beyond what any meritocracy should have allowed. You dont have a single hammer to smash down a nail Chris. You need a suite of policy measures to address failures of the free market. And for that you need a ... shock horror ... government.

    Attacking governments ad hoc ultimately undermines free market economics and more free market economists might want to take note of that.

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  • Matthew Hutchens:

    30 Apr 2014 8:13:11am

    Not the best written article I have ever read. One of the 'links' refers to a 'blog'... Another requires login to read... When I followed a link to see support for an assertion in the article, I could not find the assertion mentioned...

    The general impression I got from the article is that the author does not support the arguments put forward by the Picketty book, the subject of the article.

    Blind Freddy can see that the Western World is dancing to the low growth tune almost in step with one another.

    One thing I find most interesting is the seemingly gaping chasm between the supposedly linked confidence and economic growth.

    What creates economic growth? Whatever is the root cause of the growth, it will almost always require new 'investment' to realize the growth.

    Where does the capital for investment come from? Many different places, but the capital has to be free. Free capital is becoming more and more limited to the super rich through documented and measurable inequality.

    So we are relying on those who are already rich to drive the economic growth which may allow others to get rich as well. Hmmm.

    And furthermore said rich are already hideously rich. Hmmm.

    I still have no idea how mass capital accumulation can 'actually boost the wages of the rest of us'.

    I did however come across an argument that the Plinketty parameter r should include risk.... Umm it does - it is the realized rate of return including risk... not the promised rate of return before risk... ?????????

    Plinketty puts it eloquently with his formula and argument. In layman's terms, real economic growth is soildly linked to the confidence that encourages new investment. Inequality seems to have created a ruling elite with no desire for economic growth due to the massive accumulation of capital made possible by a long period of previous relative high economic growth and wages inequality.

    I think the another support for the argument is the extrapolation to apparent inverse proportionality between economic growth and wage inequality. (ie as economic growth falls, wage inequality rises)

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  • Basil C:

    30 Apr 2014 8:34:45am

    All good Mr Berg, but what concerns me is the creep from the top 1% being the beneficiaries of inherited wealth to the top 9.9% being so. Bit by bit there is an entrenching of inherited privilege in this country. Education inequality, access to health care, access to affordable dental care, the rise of an internship culture in top professions, even things as prozaic as restrictive zoning in posh suburbs to preserve land values. Little by little the top 10% are having their inter-generational interests looked after at the expense of broader social mobility. In the long term we will all be the poorer for it.

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  • Richard:

    30 Apr 2014 8:39:07am

    Berg's argument here seems basically a variant of the "I never got a job from a poor man" argument. Which is completely misguided. The vast majority of economic activity is based around servicing the want and needs of middle class and lower class people.

    Rich people get rich because other people have money to spend. The trickle down theory and supply side economics has it totally backwards. If there is demand for something, someone will step up and provide it. The illicit drug market is evidence of this.

    The most powerful economic argument against inequality regards the "marginal propensity to save". I.e. as people become richer, they spend a smaller fraction of their income and save a greater fraction. This removes cash from circulation and slows GDP growth.

    The most vibrant and robust economies come from having a large middle class on good wages. We don't need to strip the wealthy of what they have to achieve this. But we do need to redefine the rules of the game that produced the current imbalance.

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    • Andrew:

      30 Apr 2014 9:57:31am

      Richard, I'm no economist, but I thought that saving puts money in banks, where it can provide capital for investment in productive industry.

      This, in turn, produces goods and wages, leading to an increase in GDP, with some going to the investor, some to the bank's shareholders, some to the wage earner, and so on.

      Isn't that how capital (and capitalism) works?

      Without saving, how would investment be financed?

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      • Richard:

        30 Apr 2014 10:17:33am

        A fair point. However, in Australia, investment is funded mostly by debt and our debt is mostly acquired in European debt markets. Bank deposits make up around 45% of bank funding.

        I do agree that investment is one of the major drivers of long term productivity. This is where the rel cost of our runaway housing market lies. Far too much of our investment capital is tied up in the housing market that produces very little.

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      • graazt:

        30 Apr 2014 12:51:28pm

        Yes, you need capital for capital productivity. As you need labour for labour productivity.

        However without demand, there's little use for productivity as no-one has money to buy what you're selling.

        Which is a problem with the shrinking slice of a bigger pie model and concentration of wealth. The less wealth is distributed, the lower the aggregate marginal propensity to consume. Which in turn results in lower growth.

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  • arf:

    30 Apr 2014 9:08:10am

    Berg's argument is rooted.... in the quagmire of supply side economics.

    He appears to be (falsely) assuming that economic growth is powered by the rich.

    So is it more rich or richer rich that leads to more growth?

    btw the term '1%' is misleading. The bulk of global assets now resides with the top 0.1%

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    • Pete:

      30 Apr 2014 11:14:35am

      Actually, it is a fact that 0.6 percent of people on the planet own approximately 40 percent of all the world's assets (source: Credit Suisse).

      It is, of course, mind-blowing that any so-called economist or economics writer/thinker could possibly argue that this is an ok state of affairs. Completely daft.

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  • Polly Wolly Doodle:

    30 Apr 2014 9:11:02am

    All that you have written Chris has less value than one single sentence that rings true...."No doubt some extreme incomes have come at the expense of the rest of society".

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  • DeepFritz:

    30 Apr 2014 9:31:43am

    Mathematics fail. You can not grow forever. Eventually you hit limits.

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  • berational:

    30 Apr 2014 9:48:25am

    The 19th century working conditions were poor because of the inequality of wealth and power due to unfettered capitalism. It was only the advent of unions, government regulations and some of marx's principles such as universal education and the dole that changed this.

    Inequality fragments our society and reduces autonomy of the masses. The majority of people understand that a level of inequality is inevitable and beneficial but there is no way the present levels of inequality can be justified on any rational basis.

    Blind Freddie knows that perpetual growth is not possible. The world is finite. Unfortunately capitalism depends on growth, which increases inequality. Because it is inherently unstable is generates boom bust cycles (GFC, The great depression and recessions). There is evidence in the US that inequality is reducing the living standards of its less fortunate citizens. The only way historically this trend downwards has been reversed is by revolution. Lets hope we can find a better way this time.

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  • MC:

    30 Apr 2014 9:57:16am

    What the IPA ignore and direct away from by nature of their existence is that the class defines interest by its very nature and the class of grand capitalists interest is always ( as is most peoples) getting more return for less input.

    This is a simple truism that lies at the heart of the capitalist system. The system creates its own imperatives.

    Which is why we have billionaires being stimulated to implement the notion of paying two dollars a day to earn a million a pay into a local reality. Take more give less is the nature of the beasts.

    It is also why we have a total isolation from the rest of the world. Hence the mantra there is not such thing as society Capitalists only reference the interests of their own class which must involves the disempowerment of other classes and their interests. At the moment part of the way they do this is through "think tanks" which encourage people not to think and to outsource thinking in general to the lobby tanks and their sponsors.

    The problem is not lack of money in the "west" but loss of power through the professional lobby tanks encouraging people to resign their power quietly to the one percent, inch by inch. As we see the world is full of governments lovingly enjoying being romanced to doing whatever the one percent demands.

    The real kicker, and fear of one percenters, is the other truism. Namely that every time in history when wealth coagulations get broken up and thrown open to everybody then the economy booms and everybody becomes wealthier.

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  • kika:

    30 Apr 2014 10:00:12am

    chris, don't you yet know about the limits to growth? infinite growth is impossible in a finite world. its about time you learned something about economics and life!

    no, i believe that balance is necessary for stability. so even bigger gaps between the one percenters and the rest of us are not desirable either.

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  • opavanm:

    30 Apr 2014 10:07:36am

    The discussions on wealth, poverty, equality etc are like a Humboldt maelstrom. Lots of ideas, conclusions but devoid of remedial policies. One of many reasons is that we leave out of these discussions burning issues such as the wide spread political and corporate corruption, mediated by banking institutions and financial mediators. Realising that corruption is part of nature and a human condition we need a new economic/social paradigm. Governments could levy taxes on business in the form of cash payments and the issue of shares. Government then would be to distribute the cash plus shares to the people requiring support. The shares to be subject to (sales) restrictions. This would enhance saving and enable the less well off to participate in the growth of the nation's wealth, however begotten and allow a more equitable share in the fortunes for all citizens.

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  • GrumpyOldMan:

    30 Apr 2014 10:15:51am

    Berg argues ... "Inequality isn't the essential economic danger of the 21st century. The danger is slow economic growth."

    Now consider this - inequality means that the 'non-rich' do not have the educational, health (and hence employment) opportunities of the 'rich'. This means that the 'non-rich' make a lower contribution to the per-capita GDP than the 'rich'.

    So why would a policy to reduce inequality by equalising access to education and health services to the 'non-rich' not have the effect of increasing the national GDP and hence increase the growth rate? Or is that too hard a question for a conservative to answer?

    Besides how many of the 'rich' in our society still do productive work as opposed to doing (often dodgy) deals to make themselves, or their rich clients, even richer and more powerful. By getting greater productivity out of the 'non-rich' by releasing their undeveloped or ignored skills will have a much greater effect on GDP and growth than protecting the wealth and self-interest of the 'rich'.

    Berg, your argument is complete nonsense, as are the vast majority of the arguments that come out of the IPA.

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  • Chris:

    30 Apr 2014 10:18:48am

    The way I see it, the objective should be maximising the average standard of living. To do this you need to make a trade off between economic growth and income redistribution. Any approach that fixates on one to the exclusion of the other will result in a suboptimal outcome.

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  • Crisso:

    30 Apr 2014 10:49:57am

    This is the most informative set of Comments I've read on the ABC. My thanks to all for not heading straight to the richly biased "It's Liberal/Labor's fault" crap that I've become so used to reading.

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  • Culex:

    30 Apr 2014 10:52:03am

    Meanwhile, the GOP's alternative budget in the USA included US$310 billion in tax cuts for big business while rejecting a US$12 million program designed to help impoverished teenagers.

    Yeah. The ultra-rich don't skew things at all, do they Mr Berg.

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  • Not Such a Golden Oldie:

    30 Apr 2014 11:08:57am

    Pikkerton also shows quite convincingly that after the first world war when there was huge destruction of wealth, capital to fuel productivity growth came from governments far more than the private sector, financed by deficits and government borrowings. The same followed in the period following the depression and the second world war. A negative consequence of this was that governments repaid the debt through inflation, but the end result was a maintenance of productivity growth at a greater level than earlier eras (it was a catch up era).

    I think that Pikkerton is showing us that productivity growth can come without wealth inequality and that active government is not the bogy it has been represented to be.

    Pikkerton is not a Marxist and is in favour of capitalism, but the idea that we need inequality of wealth to fuel investment is false.

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  • M:

    30 Apr 2014 11:24:36am

    I don't often agree with Chris Berg's musings but this time I think he's on the money - so to speak.

    The problem is not the concentration of wealth per se, it is the misappropriation of public goods for narrow private gain e.g. Russian oligarchs.

    It'd be nice to see more of the super rich reinvest some percentage of their money in social capital to augment the tax derived essential government services.

    Over to you Gina.

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  • casewithscience:

    30 Apr 2014 11:27:22am

    Chris's comments are ideologically driven and not mathematically sound. If a single member of the community receives 90% of the income, irrespective of total community growth, the imbalance will result in economic inefficiencies. The best method is for fairly even distribution of wealth across the community so that the velocity of money across the community is kept to a maximum (See Keynes and/or Picketty).

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  • rumtytum:

    30 Apr 2014 11:48:44am

    Picketty isn't pushing a barrow, as Berg is always doing, but speculating intelligently and carefully on the implications of his unprecedentedly wide-ranging research. Nobody has accessed such a depth of information before, and what Picketty found surprised him, forcing him to wonder whether some of the things that economists always assumed to be true are perhaps not. Chris Berk starts with a conclusion, then makes the facts fit it. Picketty starts with the facts and tentatively ponders on the possible conclusions. One is a blinkered ideologue, the other a researcher.

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  • Biosphere:

    30 Apr 2014 12:59:59pm

    Growth. I grow vegetables. As much as possible I try to use a closed loop system, recycling plant waste into compost, saving seed and capturing rainwater. Plus of course, there's all that lovely free, but diffuse energy provided by sunlight.

    Economists need to get out of their offices and away from their sicreens and start understanding that the linear 'Economic Growth' model with its endless demand for FINITE natural resources, including dwindling cheap energy and every increasing build up of non utilized waste is already hitting hard limits. We live on a finite planet, clean air, water, soil and minerals doesn't give a damn about 'the economy, stupid'.

    Guess what, its the ECOLOGY stupid. How many of a these highly paid, clever boffins get that?

    How many get that the cheap energy bonanza of the last century is what powered all the surpluses we've enjoyed.

    We've entered the age of limits. Demand for the master resource, oil vastly outstrips its economically feasable supply.

    Industrial civilization, ie 'Us' has painted itself into an exponential growth corner.

    And by the way, technology is not energy. Technology requires energy. But then I suppose the mysterious mythical 'They' will think of 'something', just in the nick of time, to allow us all to continue living like Kings!

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  • Romanov:

    30 Apr 2014 1:32:35pm

    There is NO clear CUT OFF point between ONE PERCENT of top wealthy and subsequent 10 per cent of "hard working" high income earners.

    There is a considerable overlap among the highly wealth and high income in Australian society.

    But the biggest problem in a highly unequal rich society like Australia and USA is the social problems and conflicts it generates.

    The effect of a large proportion of high income people is that it generates a RUN FOR THE GOLD mindset in the rest of society.

    To many people, including those who are merely well-off, or relatively poor, trying to get wealthy by all sorts of ways and means seems the main purpose in life.

    Thus there is a shift AWAY from productive, innovative activities into fraud, speculation, buying cheap and selling dear, and "stuff you Jack, I am All Right" paradigm.

    Some try to get equal to top dogs by legal means of course, but the most do it my MEAN spirited and cruel ways, by borderline methods between legality and illegality, by various conspiracies against the public, and by criminal ways.

    So when r>g (capital returns exceed growth rate) the economy turns away from productive industrial activities into predatory activities of guarding accumulated wealth by all sorts of sophisticated structures and schemes.

    More and more sectors of the population engage themselves in redistribution activities, increasing their shares of wealth and income at the expense of others (and at the expense of government revenues).

    This is the stage now in 21st Century where Australian inequality finds itself in.

    It is amazing how Chris Berg apart of being well-informed and fluent writer lacks the essential insight how the modern global capitalism really works.

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  • 2centsworth:

    30 Apr 2014 1:33:51pm

    "We should fear slow growth, not inequality"

    Tell that to low paid workers who have seen the top 1% of incomes disappear off the top of the graph while their own incomes have practically stagnated for the last 40 years. A person earning $3 an hour in 1970 for driving a taxi now earns about $15 an hour. If their wages had kept up with "economic growth" they would be earning $45 an hour. Meanwhile the "super-rich" have far surpassed income predictions of 40 years ago. Look at some historical graphs and prediction and compare them to our present reality. If this continues, which it will, capitalism will eventually be threatened with a renewed form of communism, and that is the last thing anyone, except for extremists would want.

    There was a book written in the 1920's ( if I recall correctly ) that delved into the subject of inequality and it clearly explained the pitfalls that have lead to the collapse of some past civilizations. We tolerate gross and immoral inequality at our peril.

    Have a nice day;)

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  • firthy:

    30 Apr 2014 1:41:02pm

    The concern for me is where that wealth has been accumulated through rent seeking or activities that are harmful to the rest of us. The miners are a good example of this - they didn't create the wealth all they did is buy the mining rights. They should get some return for that but not the return they have been getting.

    Compare that to the person who risks all to go into their own business and makes it. I have no problem if they are rich unless the problem above is present. Indeed I celebrate such achievement.

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  • havasay:

    30 Apr 2014 1:57:13pm

    "But outside some Marxist intellectual holdouts, there is no suggestion that the mere existence of the super-rich creates poverty."

    I don't think Marx directly addressed Gambling in Kapital but I think in Australia today the modern Casino - who owns them and who "funds" them - prove you wrong and also prove Piketty right.

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    • Romanov:

      30 Apr 2014 2:36:27pm

      Actually, the existence of super-rich generates poverty in MANY different ways.

      You don't have to be a Marxist to understand that.

      Even a superficial study of economic history of any Western country will show you that.

      One most obvious of the ways is in tax avoidance or evasion industry.

      The very existence of tax avoidance industry in Australia will guarantee poverty for many in this country.

      Another way is to practice SABOTAGE against the government and the public at large.

      Sabotage here means "dragging of their feet" regarding the terms upon which they will invest their wealth in to productive activities and productive employment.

      Ever heard of the term FLIGHT OF CAPITAL coming from the Mining lobbyists or from the resource-based economy?

      That's what happens when you don't give the super-rich the pound of flesh from your right thigh which they demand from your nation and from your governments.

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  • JS:

    30 Apr 2014 2:03:43pm

    To simply say "we SHOULD FEAR ...", isn't that too bold?

    A balance is indeed needed between economic growth and inequality. Although one can care nothing about the gap between rich and poor, it does not change the fact that the gap exists, and it is ultimately going to cause problems.

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  • Digz:

    30 Apr 2014 2:17:12pm

    History would seem to support Picketty rather than Berg. So yes; inequality doesn't become an issue of economics, until the poor can't afford to live, when economic diaspora or revolution occurs. Economic modelling suggests that spending is good for any economy, so retained wealth in the hands of one person (with limited time, inclination or opportunity to spend) must be less powerful a force for a healthy economy than a mass of people with time and the inclination to spend (no money, no spending). Bergs comment; "there is no suggestion that the mere existence of the super-rich creates poverty" is naive at best in it's assumption that money in a managed economy is not a value tied commodity.

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  • DJ Max:

    30 Apr 2014 2:41:50pm

    Thanks for the smart article. I have never even thought about any speed of economic growth regarding the future. Rich and poor, is almost all we have been discussing. I like this kind of article where the writer explains about certain study, we can get both information and analysis from another person in shorter amount of time.

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  • Billy Swagg:

    30 Apr 2014 3:32:25pm

    Maybe the "house rules" should be suspended for 2-legged monotremes, who keep getting published with the same old locust ethic "endless growth will save us" drivel. After all, he and his ilk love "free speech", right? Can't the ABC find someone from the extreme right lunatic fringe with more than basic canine intelligence? Silly question. Have another 10 kids. There's your growth and it takes no intelligence at all.

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  • GS:

    30 Apr 2014 3:47:16pm

    Inequality is caused by individual's choices as much as anything else. And the choices can be very tiny.

    Smoke instead of investing that money, you are going to have less wealth in addition to potential health impacts.

    Have three kids instead of two, you are impacting your ability to accumulate wealth.

    Paul Omerod's book "Why Most Things Fail" details numerous studies into why all top down efforts to eliminate inequality fail dismally. They ignore the main drivers about the different values people in any society have.

    Inequality is the result of individual choices. A lot of us could be more wealthy if we let people who are wealthy decide how we should live our lives in order to accumulate wealth, but I very much doubt if most would find that acceptable.

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  • Peter the Lawyer:

    30 Apr 2014 4:29:00pm

    The gist of those here who agree with Picketty is that inequalityof welath is inherently bad because it causes social unrest and disquiet amongst the less well off.

    This argument has the same roots as the old 'poverty causes crime' or 'all people are capable of racism' tropes.

    Thus the real issue thyat if we allow too much inequality the less well off will commit crimes or revolt because of their envy of the rich.

    Is envy a lesser sin than racism? Of course not. It is in fact worse. it has caused far more deaths than racism ever will. In fact one could argue that envy of the accomplishments of other races was what led to the sort of racism that we saw light the way to the Holocaust.

    We all suggest that we fight racism by condemning the crime itself. Yet with envy, we suggest that the fight should be undertaken by hurting the vicitim rather than the perpertrator.

    I suggest we need to launch an envy awareness campaign and agitate for government legislation to make it unlawful to covet the riches of others through speaking ill of the rich. Maybe we could make it unlawful to speak in a way that any rich person would find offensive, alarming or humiliating on the basis of envy.

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Comments for this story are closed.

Source : http://www.abc.net.au/news/2014-04-29/berg-we-should-fear-slow-growth,-not-inequality/5417366

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